Poland’s stocks, bonds and currency jumped on Monday as investors bet that pro-European Union parties were on course to defeat the incumbent nationalists following the country’s general election.
In Warsaw, the WIG 20 equity index
XX:WIG20
rose 3.5% to a near seven-week high, while the yield on Poland’s 10-year government bond fell 15 basis points to 5.68%. Bond yields move in the opposite direction to prices. The Polish zloty
USDPLN,
rose 1.3% versus the U.S. dollar to 4.255 zloty.
Early results and two exit polls suggested Civic Platform won 31% of votes against the ruling Law & Justice Party’s 36.6%. But together with its coalition partners Civic Platform is on track to secure a majority 248 of the 460 seats in the Sejm, the lower house of Poland’s parliament.
If confirmed by final results due on Tuesday, it would likely mean the end of nine years of rule by the Law & Justice Party, or PiS, an ultra-conservative and populist group that through its leader, Jarosław Kaczyński, developed a fractious relationship with the European Union.
Civic Platform, in contrast, is led by former European Council President Donald Tusk, and his mooted victory points to many Poles wishing for a more collegiate partnership with the EU — a re-set that may also allow access to tens of billions of euros that had been withheld by the EU because of PiS infringing the bloc’s rule-of-law standards.
The zloty has been Europe’s best performing emerging-market currency against the euro over the past month, according to Bloomberg, as polls started to show that the PiS could be defeated and traders positioned for a more hawkish central bank.
“We expect the central bank reaction function to now turn more hawkish as Governor Adam Glapinski’s voting record has previously been more hawkish under a Civic Platform-led government,” Goldman Sachs economist Kevin Daly wrote in a note.
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