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The Warsaw Voice » Other » May 28, 2008
Warsaw - CEE FINANCIAL HUB
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Helping the Economy Grow
May 28, 2008   
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Ludwik Sobolewski, president of the Warsaw Stock Exchange, talks to Andrzej Ratajczyk.

When 17 years ago the Warsaw Stock Exchange reopened for business after a "break" caused by World War II and decades of communism, it listed only five companies. Today, the WSE's main market lists around 360 firms, including 20 foreign ones. What role does the stock exchange play in the Polish economy today?
The stock exchange in Warsaw contributes to the growth of the entire economy, as exemplified by indicators such as the growing contribution of the stock market's capitalization to the GDP. The stock exchange enables companies to make strategic decisions and then make sure that these decisions are carried out. Entering the public market makes a lot of sense for companies and gives a strategic dimension to their operations. The Warsaw Stock Exchange has been growing at more or less the same pace as the supply of capital for Polish institutional investors including pension funds. As a market, the exchange also needs to become deeper and more productive, as the supply of capital has been rising rapidly.

In many respects, the Warsaw Stock Exchange is the largest market in the region, and in terms of the number of companies it attracts, it stands as Europe's second largest. The NewConnect market has also been doing well, competing with Europe's largest alternative market, the AIM in London. Does the Warsaw Stock Exchange stand a chance to become a regional financial hub in the near future?
It is not enough for a stock exchange to be the largest one in its region in order to be regarded as a regional hub for capital. A regional financial center must list not only local but also regional issuers as well as companies based outside the region. It must attract investment from financial institutions specialized in investing money and all major financial intermediaries in the region and outside it. This is the kind of market we are building. The project involves a lot of work in terms of regulation, infrastructure improvements, competition among investing companies, investor education, stronger relations between investing companies, and brand building. This all requires a diverse range of promotional efforts. I do not want to go into detail, as competition never sleeps.

Building the status of a regional hub is not possible without having partners in other countries in the region. Which markets does the Warsaw Stock Exchange have the most promising relations with?
We mainly have partners close to the business community and in the business environment around stock markets in other countries. All markets in the region are important to us, but we focus on those with the greatest potential, including Ukraine, the Czech Republic and Romania. That is also where our relations are the best.

For many years, foreign investors have generated a considerable part of the trading on the exchange, and the number of foreign companies listed in Warsaw keeps growing. How important is foreign capital to the growth of the Polish capital market?
Foreign capital is of fundamental importance, because without it, any strategy to move from the local to the regional market is inconceivable. The competition for cross-border capital is becoming tighter and so maintaining the high level of foreign capital in the Warsaw trading is a big success on our part. Still, the investor base, as it is called, needs to be diversified. We are doing a lot to increase the involvement of individual investors in our market. I consider this to be a key factor in the market's development because greater activity among Polish individual investors translates into better liquidity of the market and that, in turn, reduces the sense of investment risk among institutional investors from abroad. That and our unsettling experience from January and February have made us introduce some modifications to our efforts to enlist investors.

The Warsaw Stock Exchange wants to encourage companies in the region to raise capital via the Polish stock market. Specifically, what are you doing to encourage foreign companies to come to Warsaw?
We use a lot of methods and since 2006 we have been gradually expanding their range, upgrading them and monitoring their efficiency. I can only say that, in my opinion, there is already a "Warsaw Stock Exchange method" and some would love to know how it works. I actually get a lot of questions about it, but since we believe the method is getting increasingly efficient, I'm going to talk about it less and less in public.
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