The FINANCIAL -- With a world class trading system, a diversified and active investor base as well as a rich product offer, with new technologies, renewed post trading infrastructure and reformed polish pension funds, one of the fastest growing markets in Europe, the Warsaw Stock Exchange aims to become international inviting issuers from all over the world including Georgia. Meanwhile, WSE is expecting a potential 20 IPOs in 2014, which are small, young and dynamic companies. This year Chinese companies will also be listed on WSE, which are almost ready to launch their transactions, according to officials.
Negotiations about listing Georgian companies on the Warsaw Stock Exchange started in 2013, when for the first time ever Georgian companies made their debut at the IPO Summit Warsaw 2013 with prospects of being listed on the Warsaw Stock Exchange. Out of several Georgian companies from banking, wine producing and construction sectors, TBC Bank responded to the call of WSE and intended to be listed on it by 2014-2015. However, TBC Bank changed its mind in 2014 and made the decision to go for the London Stock Exchange instead.
At present there are still no Georgian companies represented on WSE.
“There are several reasons why the negotiations between Georgian companies and WSE have yet to produce results,” Michael Lukac, Head of International Client Relations, KDPW, told The FINANCIAL. “For Georgian companies one of the problems is that Georgia is not yet in the European Union, which means that there is a more complicated process for listing their securities in Warsaw. Liberty Bank had one particular strategy to list in Warsaw. There were also several small companies which were wine producers, who wished to raise their capital and extend their businesses. What happened though at the time was that the Georgian economy started to boom and many of these prospective issuers did not raise the capital in Warsaw as they could do back home, in Georgia. They could find investors in Georgia,” he said.
“Another reason is that during the reign of the previous CEO Adam Maciejewski, the strategy of WSE was changed and concentrated less on foreign markets and foreign listings as they preferred to concentrate on the domestic market. Now the new CEO Paweł Tamborski, who has designed a new strategy, prefers to put an accent on foreign markets, which means that there is a possibility for Georgian companies to come to Warsaw,” Lukac added.
“You would need to create an operational link between the central security repository of Poland and security repository of Georgia. From what we have seen, a direct link would not be possible because the Georgian CSD at this moment does not have the technical capabilities. We can go through local constrained banks, which have an account in the Georgian CSD and that way we could create an indirect link. There is huge potential in Georgia, potential which is not being met by local investors simply because Georgia is a smaller country. If Georgian companies would go to the London Stock Exchange, like TBC Bank did - it is possible, of course. But the trouble is that London is a very big market and unless you are a big company you would get lost. As for Warsaw, it is a big market for the large companies in the region. Large companies in the region are not necessarily large companies in Western Europe. The door of possibilities is wide open now,” Lukac said.
There was a boom of Ukrainian companies listed on WSE in 2013. 12 new companies were listed on WSE during that time. Because of the political situation today this segment of the Warsaw market is suffering. The Ukrainian index which consists of 12 companies is dropping by 14 percent, according to officials.
Paweł Tamborski, recently appointed CEO of WSE, has designed a new strategy for developing WSE which will be announced in the coming days. Meanwhile, Tamborski told The FINANCIAL that the new strategy includes new perspectives for Georgian companies. In general, Tamborski aims to transform WSE into an international stock exchange.
“One of the elements of the new strategy is that we would like to be international. We would like to grow. For this it is important to think internationally about our activities and ambitions as well. A potential transaction merger with Vienna was one of the options to think about, the execution of this aim of being international. We would like to focus on areas like cash equity and commodity which we know to have added value and competitive advantage. At the moment we have 60 foreign companies listed in Warsaw,” Tamborski said.
“There was a drop in terms of new IPOs because of the question mark regarding the future of the pension fund. The companies from the region were asking themselves whether Warsaw is a good place for listings even potentially without Polish pension funds,” said Tamborski.
To solve this problem Poland has done pension fund reform. In December 2013, the Polish Parliament passed a governmental bill to reform the private pension fund sector in Poland. The bill required open pension funds (OFEs) to transfer 51.5 percent of their assets, primarily in treasury bonds and treasury bills (worth around PLN 127 bn/EUR 30.5 bn), to the state’s Social Security Institution (ZUS). The next step of the reform covered the automatic transfer of retirement contributions to ZUS, instead of OFE, unless an individual OFE member filed a declaration requesting his/her contributions be transferred to OFE.
“Now we understand how this segment of the Polish capital market will work in the future,” said Tamborski.
Besides the new pension funds reform the achievement that WSE is most proud of this year is bringing new technologies into the trading system.
“The year 2014 was a revolutionary year for post trading infrastructure which enables us to provide a high standard service which is at European level,” Iwona Sroka, President and CEO at KDPW and KDPW_CCP. “At the beginning of 2014 EU authorities implemented the new regulations that obliged market participants which encouraged us to move to the next level. We can now offer a full range of post trading services for Polish market participants and I also believe that for other participants across Europe. We have about 170 participants of the trade repository not only from Poland but also from the region - from Italy, Romania, Hungary and Germany,” she added.
“We can compete in a harmonized European landscape not only for full post trading services but also because of the quality and the price. However, in the future we will increase the competition between the European institutions. We intend to develop a modern capital market in Poland. We will continue to support trading on the WSE as well as opening some new services for banks. We have diversified our revenues to be more competitive and to have some space for new investment, but I think our advantage is also technologies. We use a SPAN system for risk management in the clearing house. We have our own in house technologies prepared. That’s why we are building a services portfolio based on the innovative technologies. The system is flexible and effective and we can easily adopt it to any different technology,” Sroka said.
“The European Central Bank has an initiative to move the settlement in Europe to a common platform by 2017-1218. Now we are just monitoring this initiative, because mostly our settlement is trades in Polish Zloties. That is why it is not worth that money to connect in a platform that we have just 2 percent transactions settled in Euros. But of course we would like to be ready for the date when our government will announce that we will go with Euro as a currency to be ready to easily join the system,” Sroka added.
Norway’s Government Pension Fund Global, the European Bank for Reconstruction and Development and PKP Cargo - Poland’s largest railway cargo carrier, have won the Warsaw Capital Market Summit 2014 Awards. The awards recognise the excellence of institutions and their efforts in building a strong and attractive market in Poland and the whole of Central and Eastern Europe.