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The Warsaw Voice » Business » July 9, 2008
Economy
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Warsaw Bourse Opens Kiev Office
July 9, 2008   
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The Warsaw Stock Exchange (WSE) opened a representative office in the Ukrainian capital Kiev in late June. The office will serve as an information center for potential issuers and investors in Ukraine who are interested in either raising or investing capital in Warsaw.

The Warsaw Stock Exchange is the first foreign stock exchange to have opened an office in the Ukrainian capital.

"The opening of the WSE representative office in Ukraine is a sign of just how important the Ukrainian market and business with Ukraine are to us," WSE president Ludwik Sobolewski said at a press conference in Kiev June 25. "We can see the potential offered by the Ukrainian market and believe that close cooperation will bring a lot of economic benefits to both countries."

Michał Chyczewski, Poland's deputy Treasury minister, called the event "a milestone on the road toward integration between the Polish and Ukrainian capital markets." He said, "The WSE aspires to become the financial hub in the Central and Eastern Europe region, and Ukraine is one of its most important partners."

The WSE is steadily strengthening its position in Central and Eastern Europe. In terms of the number of listed companies, stock exchange debuts and the derivatives market, the Warsaw bourse is the unquestionable leader in the region. In terms of capitalization, or the combined market value of all listed companies, the Warsaw exchange is almost three times the size of its counterpart in Prague and more than four times the size of the Budapest stock exchange. The WSE has also been consistently catching up with Wiener Boerse in Vienna, which is considered to be the main competitor of the Warsaw market. At the end of 2005, the capitalization of Wiener Boerse was more than 27 billion euros higher than that of the WSE. By the start of this year, the difference narrowed to 12 billion euros, and then shrank further to 8 billion euros at the end of May. The figures refer to domestic companies on both trading floors, while the capitalization of foreign companies listed in Warsaw is double that in Vienna. The main market in Warsaw lists almost 400 companies, including 25 foreign ones.

The WSE ranked second in Europe in terms of the number of new listings in 2007. Less than one year after its launch, the WSE's alternative market, NewConnect, lists almost 60 companies and despite deteriorating sentiment on stock markets around the world, companies are still keen to enter the trading floor in Warsaw. So far, 22 new companies, including three foreign ones, have been listed on the WSE's main market this year. The total value of the offerings exceeded zl.7 billion. NewConnect is growing at a rapid pace, and has welcomed 33 new companies this year, with more than zl.120 million worth of offerings.

The rapidly growing number of companies on the WSE, along with upcoming big-ticket privatization deals involving power and chemical plants, are expected to give an extra boost to the WSE as far as its capitalization is concerned. Growing numbers of investors are showing an interest in the Polish market. At present, 30 percent of the investors on the WSE come from abroad. Also, the number of foreign companies that are members of the WSE has increased to 19. Recent newcomers have included Goldman Sachs, one of the world's largest investment banks.

The improving international position of the WSE, combined with the country's economic growth, work to attract companies from other European countries, including Ukraine. "The WSE offers a lot of benefits to Ukrainian companies that seek capital for their development," said Sobolewski. "We guarantee access to foreign capital at a much lower cost than other stock exchanges in Europe."

At the moment, two Ukrainian companies are listed in Warsaw, vegetable oil producer Kernel and sugar company Astarta. "Both companies have a good reputation with Polish investors even though this is a generally difficult time for stock exchanges around the world," said Sobolewski.

More Ukrainian companies may soon make it to the Warsaw trading floor, Sobolewski says, as the WSE is in talks with three new businesses. One of them operates in the financial sector.

Ukraine is considered to be one of Poland's most important political and economic partners. Business between the two countries is expanding, as testified by a more than 250-percent increase in bilateral trade over the past three years. According to preliminary data from Poland's Central Statistical Office (GUS), trade between Poland and Ukraine last year was worth $7.2 billion, an increase of 33 percent from 2006. Poland's exports to Ukraine went up by 39 percent to $5.5 billion, while imports from Ukraine grew by 28 percent to $1.7 billion.

The amount of mutual investment does not, however, match the two countries' potential, experts say. The value of Polish direct investment in Ukraine stands at $670.5 million, while Ukrainian investment in Poland is estimated at $800 million.

Prospects for further business between Poland and Ukraine are good because of rapid economic growth in both countries, economists say. Ukraine's GDP expanded by 7.3 percent in 2007, and Poland's GDP grew by 6.5 percent. Ukraine needs to quickly modernize its economy, which will take considerable investment and imports of machines, appliances and new technology. Poland can offer significant help in this area. Bilateral business ties may turn out to be particularly productive in sectors such as mining, power engineering, agriculture, and construction. Bilateral contacts will improve further after Ukraine joins the World Trade Organization and establishes closer relations with the European Union of which Poland is a member. As a result, the Ukrainian economy will undergo further liberalization, enabling easier access to the local market. Finally, the joint effort by Poland and Ukraine to organize the Euro 2012 European soccer championships is bound to open new opportunities and create an even friendlier atmosphere for bilateral business.

Andrzej Ratajczyk
Kiev
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