Stock market commentary: Polish banks await EU court ruling

• WIG20 (W20) may feel pressure from the EU court ruling on FX-mortgages

• TUI (TUI.UK) and easyJet (EZJ.UK) rally on Thomas Cook bankruptcy 

• Activist investor encourages Board of Marathon Petroleum (MPC.US) to split the company

Polish banks await EU court ruling on FX-mortgages

Polish zloty has traded under pressure as of late as investors are awaiting ruling from the EU top court on FX-mortgages that will be used as a guideline for Polish courts in similar cases. The ruling is expected to be debtor-positive and lender-negative so it is also likely to have a major impact on WIG20 (W20) as the banking sector makes up over 30% of index’ weight.

In case the EU court rules that FX-mortgages should be converted to PLN using exchange rate from loan origination date, Polish banks may be forced to create reserves that could be a significant drag on profits. Estimates of potential losses vary greatly and those are likely to materialize over a few years. However, there is a high likelihood that a short-term price reaction on shares of individual banks and, in turn, on the index level will occur in response to the ruling. Court of Justice of the European Union will announce the decision next Thursday, 3 October. Among lenders included in the WIG20 index one can find PKO BP (PKO.PL), Pekao (PEO.PL), Santander (SPL.PL), mBank (MBK.PL) and Alior (ALR.PL). 

WIG20 (W20) bounced off a 2.5-year low around 2050 pts at the end of August. The index rallied later on and reached the 2210 pts handle, where one can find the earlier broken upward sloping trend line as well as the resistance zone. W20 is locked in between support zone ranging 2150-2160 pts and a resistance zone ranging 2210-2220 pts. A break from the range could occur next Thursday when the EU top court releases ruling on the FX-mortgages that are significant problem for the Polish banking sector. Source: xStation5

TUI and easyJet jump on Thomas Cook bankruptcy

Thomas Cook, the oldest tour operator in the world, collapsed at the beginning of this week due to a mounting debt. While this is certainly bad news for Thomas Cook stakeholders and customers, the bankruptcy made some room in the crowded European travel sector. In turn, rivals of Thomas Cook saw the share prices rise as smaller competition raised hopes for improvement in margins. Shares of TUI (TUI.DE), the German tourism company, trade around 9% higher against last weeks close, while easyJet (EZJ.UK) stock, the UK airline that recently stepped into tour operator business, jumped around 8.5%.

TUI (TUI.DE) traded in a downward trend since mid-May 2018. The price made a few upward corrections over the course of the past dozen or so months but the largest ones equaled no more than €2.2 (yellow rectangles). Company’s share price jumped at the beginning of the week, thanks to bankruptcy of its rival Thomas Cook. In turn, the stock broke above the upper limit of the Overbalance structure hinting at a potential trend reversal. Source: xStation5

Activist investor seeks a split of Marathon Petroleum 

Elliott Management, famous activist investor, send a letter to the Board of Marathon Petroleum Corporation (MPC.US) urging management to split the company into three separate entities. Elliott claims that combining convenience stores, midstream oil business and refining business does not provide much synergies and that a split could unlock a value of $22 billion. Activist investor states that leaving current company structure unchanged risks share price permanently lagging company’s intrinsic value. While Elliott holds a stake of only 2.5% in Marathon, share price of oil company jumped over 8% on Wednesday when the news hit the market. 

Share price of Marathon Petroleum (MPC.US) jumped on Wednesday when the letter of Elliott Management to the Board of the company was published. In spite of Elliott having such a small stake in the company, stock surged over 8% yesterday. In turn, a break above the price zone ranging $57-58 was delivered and the price is now approaching the resistance ranging above the 38.2% Fibo level ($61) of the downward move started in September 2018. Source: xStation5