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The Warsaw Voice » Business » June 11, 2008
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Inertia Sets In
June 11, 2008 By Michal Jeziorski   
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The Warsaw Stock Exchange saw little investor activity in May, with the WIG broad market index inching down by 0.1 percent and the WIG20 blue-chip index shedding 0.6 percent.

The market remained quiet even as investors sold stock due to fears of higher inflation and rising oil prices, which passed the $130-per-barrel mark.

The mood improved slightly at the end of the month when some investors began to buy shares encouraged by news of Poland's fast GDP growth in the first quarter and optimistic forecasts for the whole of the year. In the first three months of this year, the Polish economy grew by a healthy 6.1 percent.

Meanwhile, what are known as "grosz companies" may soon prove to be a hit on the Warsaw Stock Exchange. The name designates companies that have hit rock bottom and dropped to the lowest possible price level on the market-that of 1 grosz, or one hundredth of a zloty.

Overall, all companies whose shares cost less than 10 groszy are referred to as "grosz companies." Their low prices are usually the result of splits whereby a share with a nominal value of zl.1, for example, was once converted into 10 shares, each with a nominal value of 10 groszy. Last year, when the market was bullish, many companies issued hundreds of millions of new "grosz shares." The announcement of a split alone was frequently enough to boost share prices. When in January last year, Elkop went public with a plan to make a split in March, its price rocketed from zl.18 to zl.62 per share, or almost 250 percent.

Five "grosz companies" are currently traded on the Warsaw Stock Exchange. They are FON, which costs 3 groszy per share, Mewa (2 groszy), PcGuard (4 groszy), Sanwil (10 groszy), and Elkop (3 groszy). Orzeł is close to becoming a "grosz company," currently trading at 12 groszy per share.

Almost at every session, at least one of these companies has been among either the greatest gainers or losers, and increases or declines by some 30 percent have been nothing unusual. The point is that the Polish Commercial Code does not permit the value of any share to drop below 1 grosz. This means it is technically impossible to lose money when you buy shares at 1 grosz, and the minimum profit is 100 percent, because 1 grosz is the minimum unit in quotations. This way, the least a share can cost is either 1 grosz or 2 groszy, so you cannot help but double what you have.
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