The year 2024 was marked by a rebound in stock markets and a steepening of yield curves.
Global and local equity and bond market
The decline in inflation in key markets has created space for major central banks to begin cutting interest rates in 2024. The exception was the BoJ, which in the face of elevated inflation, raised interest rates, although the level of interest rates in Japan remains relatively low. The start of a cycle of interest rate cuts favored stock markets, but growth in emerging markets slowed at the end of the year on concerns about the impact of the economic policy changes announced in the US election campaign by President Donald Trump’s administration. Concerns then also increased about the possible continuation of inflation longer at elevated levels, which supported the steepening of yield curves in the bond market. In Poland, the first half of last year saw increases in stock market indexes. In the background were expectations for a rapid rebound in domestic demand and hopes for a quick release of RRP funds. The second half of the year saw a deceleration in these trends, due in part to lower-than-expected growth in household consumption and weak industrial production results.
Interest rates
The first half of 2024, in the major economies of the Western world, was marked by expectations of rate cuts by central banks, while the second half was a period of implementation of rate reductions. On an annual basis, this meant a rate cut by the Fed to 4.50%, from 5.50%; by the ECB to 3.15%, from 4.50%, by the BoE to 4.75%, from 5.25%, and by the SNB to 0.5%, from 1.75%. The most important argument for the rate cuts by these central banks was falling inflation, following the cessation of shocks related to the Russian aggression against Ukraine and, in the case of Europe, a weak economic outlook.
The situation was slightly different in Asia. China entered 2024 with a cycle of rate cuts already underway, coming down with the main rate to 3.10% in late 2024, down from 3.45% in late 2023. The reductions were backed by low economic activity, with falling y/y inflation. In contrast, the BoJ, in response to rising inflation, raised interest rates to 0.25% in late 2024 from -0.10% in late 2023.
Central banks in most developing countries have entered a cycle of reductions, motivated by declining inflationary pressures, with Turkey and Indonesia, the beginning of the year still marked by increases. India kept rates unchanged. An unusual situation occurred in Brazil, where the central bank cut rates in the first half of the year and returned to increases in the second half of the year in response to a change in inflation trends.
In Poland, rates remained stable throughout 2024. The NBP argued for keeping rates at elevated levels with the risk that the y/y CPI would remain above the inflation target for most of the year, despite the sharp decline in the y/y CPI in the early months. At the same time, the central bank pointed to uncertainty about the prospects for a rapid descent of inflation to target in the face of high wage growth and uncertainty about the impact of household energy price regulation on the CPI path. Other central banks in the region cut rates in response to declining inflation rates. The exception was Russia, which experienced rising rates and inflation.
Bond markets
At the beginning of 2024, government bond yields were rising in the underlying markets of Europe and the US. In the Eurozone, debt was negatively impacted in Q1 2024 by the ECB, which held off on suggesting rate cuts, using fears that expected wage growth would undercut inflation as an argument. In the US, upward pressure on yields was sustained by a slower-than-expected decline in inflation in the first months of the year. In the second half of the year, trends reversed on both sides of the ocean, thanks in part to weaker U.S. labor market data and announcements of rate cuts by the ECB and Fed, and the subsequent implementation of those announcements. At the end of the third and beginning of the fourth quarter, U.S. bond yields returned to gains in response to this time positive surprises from labor market data and rhetoric in the presidential election campaign. German paper yields reacted much weaker, due to negative data surprises from Europe’s major economies and the prospect of relatively deeper interest rate cuts by the ECB in 2025. As a result, U.S. bond yields rose to 4.25% at the end of 2024, from 4.23% at the end of 2023, for 2L, to 4.38%, from 3.84% for 5L, and to 4.58%, from 3.88% for 10L. German bonds, meanwhile, moved, to 2.08%, from 2.38% for 2L, to 2.15%, from 1.93% for 5L and to 2.36%, from 2.02%.
For most of 2024, the dollar-denominated JP Morgan Emerging Markets Bonds ETF index rose, but eventually fell slightly below its year-end 2023 value. In the first three quarters of 2024, the increase in the value of the index was determined by declines in global inflation and expectations of declines in central bank rates. The index’s decline, which began at the end of the third and beginning of the fourth quarter, was a result of yield rallies in the underlying debt markets and the deceleration of disinflationary trends in some emerging market economies.
In 2024, trends in the domestic debt market were similar to those in global markets. Yields rose in the first half of the year, driven by the behavior of the underlying markets and the slow growth of the country’s annual inflation rate starting in April 2024. After declines in the third quarter, following the behavior of the underlying markets (reaching lows around 4.7% for 2L, 4.9% for 5L and 5.1% for 10L at the time), yields returned to rally in the fourth quarter. This was influenced by the underlying markets and uncertainty about the MPC’s next moves with the expected amendment to the country’s budget law. Consequently, SPW yields closed at 5.17% at the end of 2024, up from 5.12% at the end of 2023 for 2L, at 5.65%, up from 5.02% for 5L, and at 5.90%, up from 5.20% for 10L.
Stock markets
Throughout 2024, there were rallies in the underlying stock markets. The clearest disruption of this trend occurred in Q3 2024, due to surprisingly weak labor market data in the US, coinciding with another interest rate hike in Japan. Finally, on a y/y basis, the DAX index rose 3.6%, the S&P 500 rose 23.3%, and the TOPIX rose 17.1%. This spread of increases reflected the weakest outlook for the German economy against the US and Japan. Representing global equity markets, the iShares MSCI Acwi Dollar Index ETF rose 15.5% for the year.
The situation in emerging markets has not been as good. Representing emerging markets, the dollardenominated iShares MSCI EM UCITS ETF index grew relatively steadily through the first three quarters of 2024, only to decline in the fourth quarter. The deterioration came in response to the fears created by the deglobalization narrative during the US election campaign and the accompanying strong increases in US government bond yields. In the background was the slowing of expectations for rate cuts in the US. As a result, the index rose only 4.9% for the year, although during the year the return relative to the end of 2023 was temporarily much higher. By geographic region, growth was negatively affected by the large Latin American economies of Mexico and Brazil, as well as some Asian economies.
The first half of 2024 was marked by increases in the WIG and WIG20. Indexes rose in anticipation of consumption growth fueled by wage increases and an expected strong fiscal expansion. In the background, there were also hopes for a quick release of RRP funds. The second half of the year brought disappointment with the scale of domestic household consumption growth and a decline in industrial activity. In response, there were declines in the values of both indexes. In total, this translated into a +1.4% y/y change in the value of the WIG index, and the WIG 20 index by -6.4%.
Foreign exchange markets
By 2024, the EUR/USD exchange rate had fallen to 1.04 from 1.11 at the end of 2023. The changes were due to an improving US economy and a slower pace of interest rate cuts than in the Eurozone. The yen weakened against the U.S. dollar from 140.92 to 157.37, reflecting the BoJ’s continuation of a still very soft monetary policy despite the interest rate hike.
In 2024, the Mexican peso (-19.0%, due to political uncertainty related to the change of the country’s president and the collapse of the carry trade on the MXNJPY pair after the interest rate cut) and the Brazilian real (-21.5%, due to President Lula da Silva’s loose fiscal policy) lost ground against the dollar. Asian currencies fared slightly better, nevertheless they too were losing to the dollar due to the link to a weakening China (the yuan lost 2.7% to the dollar in 2024). The currencies of the Central and Eastern European region also weakened, particularly the Hungarian forint, which lost 12.4%, due in part to interest rate cuts by the MNB.
Over 2024, the EUR/PLN exchange rate went down from 4.35 to 4.27, whereas USD/PLN – increased from 3.93 to 4.10. A good macroeconomic outlook for Poland and the start of a cycle of interest rate cuts by the ECB supported the zloty’s appreciation against the EUR. The CHF/PLN exchange rate moved from 4.68 to 4.54 during this period.
Polish investment and pension fund market
Investment fund market
Source: IZFiA
As at the end of 2024, assets under management of domestic investment funds were above PLN 379.5 billion (at the highest level in history), compared to PLN 320 billion at the end of 2023, representing a increase by over 18.5% (+PLN 59.1 billion). Never in the history of the Polish investment fund market has the nominal annual increase in asset value been so high. The previous record was set in 2023 (+PLN 51 billion), and before that, precisely a decade ago (in 2015), when assets grew by PLN 43.4 billion in a year.
In terms of annual growth (in percentage terms), ECS funds saw the largest increase in assets (+39.4% y/y), which at the end of December reached PLN 26.4 billion (data for TFIs only, excluding PTEs and TUs).
Last year, most TFIs achieved growth in assets under management, which in three cases counted at a triple-digit rate. The net asset value of nine TFIs declined over 2024.
Employee Capital Schemes
The net asset market value of the target date funds under the Employee Capital Schemes totaled over PLN 30.24 billion at the end of 2024, compared to PLN 21.8 billion at the end of 2023, an increase of 38.7% on a yearly basis. The net asset value of ECSs managed by TFIs amounted to PLN 26.4 billion at the end of 2024.
In 2024, further contributions from employees (2-4% of gross remuneration), employers (1.5-4% of employee gross remuneration), as well as welcome (PLN 250) and annual (PLN 240) surcharges from the state, were regularly paid for the ECS.
The number of employees enrolled in ECSs significantly contributed to the increase in assets. As at the end of 2024, there were 913,242 people enrolled in TFI PZU compared to 2023 (820,028), an increase of 11.4% y/y.
Source: Chamber of Fund and Asset Management (IZFiA), Polish Financial Supervision Authority (KNF), DDF net asset value by managing institutions, data for TFIs only.
Pension funds market
At the end of 2024, the net assets of open-ended pension funds amounted to more than PLN 213 billion, an increase of 2% compared to the end of 2023. The increase in the value of assets was mainly influenced by the good situation in the capital markets, which recorded significant increases in stock prices after the declines recorded in 2023.
Voluntary Pension Funds
Despite high volatility in the equity market in 2024, assets of voluntary pension funds rose to more than PLN 2.2 billion at year-end.
In addition to the increase in net asset value resulting from the fund management, the value of assets was significantly impacted by current contributions. In 2024 the net contributions to DFE amounted to over PLN 211.7 million in 2024 at DFE PZU. At the end of 2024, DFE PZU remained the IKZE market leader in the voluntary pension fund segment in terms of both the number of accounts (55.8% of all accounts) and the value of assets (49.1%).
Source: KNF, monthly data on the OFE market, data for December 2024
Main factors affecting PZU share prices
PZU made its début on the Warsaw Stoc Exchange (WSE) on 12 May 2010. Since then, it has been included in the most important index – WIG20 – calculated on the basis of the portfolio value of the 20 largest and most heavily traded companies on WSE’s main market. PZU also belongs to the following Polish indices: WIG, WIG30, WIG-Poland, WIGdiv, WIG20 TR, WIG.MS-FIN, CEEplus and WIG ESG (sustainable development index) and the following international indexes: MSCI Poland (emerging markets), Stoxx Europe 600 (developed markets) and FTSE Russel midcap index (developed markets).
Warsaw Stock Exchange indexes
In 2024, the Polish blue chip index (WIG20) oscillated within a broad band between 2,123 and 2,593 points. The variance between these figures was 470 points and was 231 points lower than that observed in the corresponding period of 2023 (701 points). In 2024, WIG20 fell by 6.4% y/y, or by 1.3% y/y if dividends are taken into account (WIG20 TR). The WIG broad market index gained 1.4% y/y. The situation of small and medium companies indexes was slightly better, sWIG80 and mWIG40 gained 3.0% and 5.8% y/y, respectively.
PZU’s share price
PZU shares in 2024 followed the major indexes of the Polish stock market, staying in a strong upward trend in the first part of the year. In 3Q 2024, there was a temporary deterioration in the behavior of PZU’s share price relative to benchmark indexes. This was related to, among other things, the flooding in southwestern Poland, which caused temporary concern about the event’s impact on the PZU Group’s financial performance. At the last session of 2024, PZU shares were priced at PLN 45.8, up 3.0% y/y (not adjusted for dividend paid per share – PLN 4.34).
After the share price was adjusted for dividend, the total rate of return on PZU shares in 2024 was 6.9%, i.e., 8.3 pp above the return index, WIG20 TR. The highest closing price level was PLN 55.50 (16 May 2024).
Source: https://biznes.pap.pl/
Source: www.stooq.pl
Capitalization
The stock market value (capitalization) of PZU at the end of 2024 was PLN 39.6 billion (up 3.0% y/y, excluding dividend), placing it 4th (down 1 position y/y) in terms of market price among Polish companies listed on the WSE. PZU’s share in WSE’s total trading volume was 6.3% (7th place – no change y/y).
After adding the value of dividends per share (paid since the IPO in 2010) to the valuation of PZU shares, the theoretical stock market valuation at the end of 2024 would be PLN 72.6 billion (with a price per share of PLN 84.10).
Source: https://gpw.pl/
Source: https://gpw.pl/
| 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|
| Theoretical price at the last session of the year (PLN) | 58.44 | 64.93 | 66.94 | 81.19 | 84.10 |
| Theoretical capitalization at the end of the period (PLN million) | 50,468 | 56,072 | 57,808 | 70,113 | 72,626 |
Liquidity
In 2024, PZU’s shares were highly liquid. The average daily spread of PZU’s shares was 5 bps compared to the average spread of 10 bps for the 20 most liquid companies. The annual share turnover for the whole 2024 was PLN 20. billion, which was 52. % of PZU’s total capitalization at the end of 2024 (up 9.6 p.p. y/y).
Source: https://gpw.pl/, PZU
| PZU’s shares* | 2020 | 2021 | 2022** | 2023 | 2024 |
|---|---|---|---|---|---|
| C/WK (P/BV) Market share price / book value per share |
1.5x | 1.8x | 1.2x | 1.4x | 1.2x |
| WKNA (PLN) BVPS (PLN) Book value per share |
21.7 | 19.8 | 30.3 | 34.8 | 37.2 |
| C/Z (P/E) Market share price / net return per share |
14.6x | 9.2x | 8.1x | 7.1x | 7.4x |
| ZNA (PLN) EPS (PLN) Net profit (loss) / number of shares |
2.2 | 3.9 | 4.4 | 6.7 | 6.2 |
** data – restatement of comparative data resulting from the application of IFRS 17e przekształcone - przekształcenie danych porównawczych wynikające z zastosowania MSSF 17
| PZU’s shares-related statistics | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Maximum price (PLN) | 41.80 | 41.65 | 37.82 | 48.90 | 55.50 |
| Minimum price (PLN) | 20.55 | 29.27 | 23.16 | 31.63 | 39.15 |
| Theoretical price at the last session of the year (PLN) | 32.36 | 35.35 | 35.42 | 47.27 | 45.84 |
| Average price per session (PLN) | 30.06 | 35.86 | 30.97 | 40.13 | 47.14 |
| Turnover value (PLN million) | 17.588 | 18.565 | 14.645 | 17.692 | 20.945 |
| Turnover (items) | 595,296,291 | 517,939,229 | 472,866,103 | 436,702,363 | 447,904,241 |
Bank Pekao and Alior Bank share prices
Context in the banking sector
In 2024, the WIG-banks index1 recorded an increase of 11.6% y/y, beating the WIG20 index by 18.0 pp. The correlation between the WIG Banks index and the WIG20 index was 90% (+ 1 p.p. y/y). The beta coefficient (in relation to WIG20) decreased by 0.11, to 1.11. The growth of the WIG BANKS index is largely the result of the continued strong performance of banks at the net profit level, achieved in an environment of high interest rates. At the same time, some investors began to discount the interest rate cut and the deterioration in future performance, leading to a much weaker behavior of this index compared to 2023, when the WIG-banks index recorded an increase by nearly 77%.
Source: https://biznes.pap.pl/
Bank Pekao and Alior Bank
At the end of 2024, the Alior Bank share price was PLN 86.0, i.e., it went up by 12.6% since the beginning of the year. After adjusting the level for dividends, the rate was 17.7%.2
In that same period, the Pekao Bank share price dropped by 9.3% (in terms of price) to PLN 137.9 per share. After adjusting the level for dividends, the rate was 0.9%.3
1. Total return index (which takes into account both the price of the shares included therein, return on dividends and the preemptive right).
2. On 24 May 2024, Alior Bank paid out a dividend of PLN 577 million (PLN 4.42 per share).
3. On 10 May, Bank Pekao paid out a dividend of PLN 3.4 billion (PLN 19.20 per share).