Warsaw Exchange Woos Institutional Investors

Terry Flanagan

The Warsaw Stock Exchange (WSE) has intensified its campaign to become the leading player in emerging central and eastern Europe, as it aims to capture ever more institutional flow from western European markets.

Its latest offering, the WIG-CEE index, which launched yesterday, is a stock index that includes companies from countries stretching from the Baltic to the Balkans and it aims to establish the Polish bourse as the destination of choice for investors looking to exploit the growing potential of central and eastern Europe by developing a product that would represent the economies of the entire region. The move is also an attempt to pull in new listings.

“It was our intention to create an index representative of the economies of the entire region of central and eastern Europe; we believe that this criterion can interest institutional investors,” said Ludwik Sobolewski, chief executive of WSE.

“One of the main reasons to create this index was to demonstrate that foreign companies listed on the trading floor in Warsaw get added value through greater exposure to investors active on the largest, most liquid and most diverse market in this part of Europe.”

The 25-company index includes firms from the Czech Republic, Ukraine, Hungary, Estonia, Bulgaria, Lithuania, Croatia, Latvia, Romania, Slovakia and Slovenia. The list is dominated by three firms, which account for nearly 75% of the weighting. They are Kernel, a Ukrainian food company; CEZ, a Czech energy company; and MOL, a Hungarian oil refiner.

The index was launched on Wednesday at around 800 points, and was calculated back to December 2010, when it would have been 1,000 points. This indicates the fall in the value of shares caused by the eurozone crisis over the period.

The WSE, which is MiFID compliant, is now the dominant player in central and eastern Europe, accounting for just over half of all equities traded in the region. It aims to challenge its bigger rivals to the east, the Moscow Exchange in Russia and Turkey’s Istanbul Stock Exchange, while also offering a cut-price alternative to the more expensive western European markets.

In its continued quest to attract liquidity and gain market share, the WSE is currently busy overhauling its trading infrastructure, in a co-operation agreement with stock exchange operator NYSE Euronext, aimed at facilitating easier access for foreign investors, including high-frequency traders.

“The Warsaw Stock Exchange is certainly interesting many of our clients; there is a move towards Poland,” one source, based in London, told Markets Media.

Poland has been surprisingly resilient in the face of the financial crisis and ongoing eurozone crisis and its economy has grown 15.7% between 2008 and 2011. This is compared to a European Union average of -0.5% for the same period.

WIG-CEE is the third WSE index mainly based on the criterion of the companies’ country of origin, following on from WIG-Poland and WIG-Ukraine. The WSE’s regional rival, the Vienna Stock Exchange-led Central and Eastern European Stock Exchange Group, which also includes stock exchanges in Budapest, Ljubjana and Prague, offers 10 CEE-based indices.

The WIG-CEE index can include companies from a given country provided that at least two companies from the country are listed on the WSE, either on its regulated or alternative market, and that the companies are classified from different sectors.

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