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The Warsaw Voice » Business » March 31, 2011
Business & Economy
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Expanding Fast
March 31, 2011   
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Twenty years after it opened, the Warsaw Stock Exchange is one of the fastest expanding trading floors in Europe and a financial hub for the region.

When the Polish capital market emerged after the fall of communism, its beginnings were far from impressive. Only five companies were listed at the market’s first session April 16, 1991, with a paltry 112 buy and sell orders and total turnover at just zl.1,990, or around $2,000.

After this low-key debut, few expected that in the next two decades the Warsaw Stock Exchange (WSE) would become one of the most developed markets in Central Europe in terms of capitalization—or the total value of shares listed on the exchange—turnover, number and type of instruments listed as well as organization and technology.

Today 401 domestic and foreign companies are listed on the WSE’s main market and the exchange’s capitalization exceeds zl.820 billion. Another strength of the WSE is the number and value of IPOs. In 2010, the exchange ranked second in Europe in this respect.

According to a recent IPO Watch Europe report published by consulting firm PricewaterhouseCoopers, 112 new companies were listed on the WSE last year, 26 on the main market and 86 on the NewConnect alternative market. NewConnect saw the largest number of IPOs among alternative equity markets in Europe.

The strength of the Polish IPO market in 2010 was also reflected in the successful debut of the country’s largest insurance company, PZU, and the Tauron Polska Energia energy group, both ranked among the 10 largest IPOs in Europe last year.

In another milestone event last year, the WSE company floated shares to the public and entered its own trading floor. The WSE’s IPO attracted huge interest among domestic retail investors and global institutions. In the case of the latter, demand was more than 25 times higher than the number of shares designated for international institutional investors.

The WSE is an attractive floor for not only Polish companies but also foreign issuers. Thirty-two foreign companies are listed on the WSE, including four on the NewConnect market. Most of them are based in Central and Eastern Europe, including five in Ukraine.

“2011 may be a year of debuts for companies from the Central and Eastern European region,” said Tomasz Ciborowski, director of the IPO and New Capital Market Issues Department at Bank Zachodni WBK. “Apart from Ukrainian companies, stock market debuts by companies from Bulgaria, Slovenia and perhaps also from Romania and Baltic states can be expected.”

An agreement with the New York exchange was of special importance to the WSE’s further expansion and for strengthening its competitive edge. In July last year, NYSE Euronext and the WSE announced they were entering into long-term strategic cooperation, including the development of mutually advantageous business projects and the migration of the WSE trading platform to the NYSE Technologies Universal Trading Platform. The cooperation agreement is expected to help the WSE develop because NYSE Euronext is a leading global financial market operator providing innovative trading technology.

The WSE’s future position in Europe will depend on the condition of the Polish economy and on global developments, such as the expected merger of the New York and Frankfurt exchanges.

Bartosz Sawicki, an analyst with TMS Brokers SA, says the merger between NYSE Euronext and Deutsche Boerse will undoubtedly have an impact on the WSE. However, the merger itself is unlikely to influence the position of the WSE among its regional competitors, he says.

“Over the last few years the WSE has become a very relevant market in the region, yet it cannot be perceived as competition for such exchanges as the London Stock Exchange or Deutsche Boerse,” Sawicki said. “Secondly, Polish public companies are seldom interested in becoming listed abroad. What is more, the WSE attracts foreign companies which seek considerable liquidity and recognition—a combination that the Polish capital market can provide them with, in contrast to the majority of both regional competitors and globally recognized stock exchanges.”

For example, in 2010 average daily turnover in the stock of Ukrainian sunflower oil producer Kernel amounted to zl.11.5 million, or zl.5.75 million if counted in accordance with current methodology, and the company’s market capitalization has recently exceeded zl.5.8 billion. On most of the major stock exchanges, Kernel would probably be a company of minor interest and relevance, whereas in March the company will be incorporated into the WSE’s WIG20 blue-chip index.

“The second side of the coin is which trading system will gain popularity after the merger,” says Sawicki. “Currently, Deutsche Boerse operates Xetra (Exchange Electronic System) and NYSE Euronext operates UTP (Universal Trading Platform). The first system is widely used in Europe, for example by the exchanges in Vienna, Prague and Sofia. The latter is to be implemented on the WSE in July 2012 and it will enable algorithmic and high frequency trading. If any delays occur or NYSE Euronext withdraws from the partnership with the WSE, this may have some negative impact on the future of the Polish capital market.”

Andrzej Ratajczyk

Financial Hub for the Region Ludwik Sobolewski, president of the Warsaw Stock Exchange:

“The Warsaw Stock Exchange is the largest exchange in this part of Europe. We have a very wide range of financial instruments targeted at both investors and issuers. Besides the main market and the NewConnect alternative market, there is also the Catalyst debt securities market for corporate and municipal bonds, in operation since 2009, and we recently also launched an energy market. The market for derivative and structured instruments is also strong. The WSE is interested in building a strong energy trading market in Central and Eastern Europe in conjunction with domestic and foreign partners. We have vast experience in international cooperation, at both the technological and business levels. We are increasingly a stock exchange of choice for issuers from countries neighboring Poland. The Warsaw exchange has for some time been a financial hub for the region and one of the fastest expanding stock markets in Europe.”
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