Warsaw Stock Exchange seeks developed market status within 3-5 years

Warsaw Stock Exchange CEO Tomasz Bardziłowski told Bloomberg that he expects nan Polish superior marketplace to turn successful nan coming years and participate nan ranks of a "developed economy".

Such an upgrade, expected by Bardziłowski successful nan adjacent 3 to 5 years, would make it nan first erstwhile communist state successful Europe to gain that classification from nan scale supplier MSCI.

Post-communist European nations are typically labelled frontier aliases emerging markets, hampered by smaller superior pools, weaker institutions, and constricted overseas investment. Poland's breakthrough to “developed market” position would truthful people a symbolic milestone for nan full Eastern flank of nan continent — particularly aft decades of Soviet-era cardinal readying and anti-global policies slowed nan region's growth.

Poland's description is expected to beryllium facilitated by nan government's OKI finance account project, which could lead to a broadened home investor base. The caller type of relationship will let individuals to put up to 100,000 złoty (€23,600) tax-free. Another facet is nan projected improvement of nan defence assemblage and nan accelerated maturation of subject spending successful Eastern Europe, fuelled by information threats from Russia.

Recognition arsenic a developed marketplace by a starring banal scale supplier would pull an inflow of superior for Poland done ETFs.

This would unfastened entree to galore much funds, arsenic good arsenic perchance expanding nan valuation of Warsaw companies. This is linked to little consequence premiums that investors expect from much unchangeable markets.

A developed economy, but nan marketplace lags behind

Currently, shares listed successful Warsaw are portion of nan MSCI Emerging Markets Index, wherever they relationship for 1.1% of its value.

FTSE Russell already upgraded Poland to developed-market position successful 2018 — nan first successful Central and Eastern Europe to gain that explanation — but MSCI has yet to travel suit.

"We are rather alert that successful nan emerging marketplace beingness we are a overmuch bigger food than we would beryllium successful MSCI’s developed basket," Bardziłowski told Bloomberg.

"We request to activity to debar staying beneath nan radar screens of nan immense mostly of investors," nan CEO added.

Przemysław Kwiecień, main economist astatine XTB, is sceptical astir Poland's chances of moving up successful nan MSCI markets classification. In his opinion, Poland is not a fewer years distant from this goal, but a fewer decades.

"Economically, Poland tin beryllium considered a developed economy. We are making a civilisational leap, we are joining nan G20 and we are getting person to nan starring countries successful position of GDP per capita aliases salaries," he explained.

"In position of markets, however, it is much a mobility of really investors respond to different situations and to what grade nan system is based connected home capital. In this respect, Poland is very limited connected world superior flows. In my opinion, this will not alteration truthful quickly," Kwiecień continued.

Economic indicators specified arsenic GDP per capita aliases wages are only nan first measurement to building a beardown financial market, because it takes clip to accumulate capital.

And it is nan size of home superior that is important erstwhile classifying a marketplace arsenic highly developed.

"When world shocks hap and world superior flows away, a marketplace that is much limited connected it will travel nether greater pressure. A marketplace that is self-financing, wherever superior marketplace needs are met pinch home savings reacts otherwise to world factors," explained nan expert.

Poland isn't nan only state that has "got stuck" trying to beforehand successful nan MSCI classifications.

"The MSCI scale of processing countries still includes, for example, South Korea, which is simply a overmuch much developed system than Poland and could agelong person claimed it deserves to beryllium moved to nan ranks of developed economies," Kwiecień concluded.

High capitalisation, debased liquidity

MSCI, successful its latest reappraisal successful June this year, besides pointed retired galore shortcomings of nan Warsaw Stock Exchange, specified arsenic shortages of banal lending and short-selling, deficiency of accusation successful English, and insufficient rules regarding nan registration and practice of shares belonging to overseas investors.

In turn, though nan capitalisation of companies listed connected nan WSE exceeds PLN 1.05 trillion (€250 billion) and is higher than nan mixed capitalisation of nan banal exchanges successful Prague, Budapest and Bucharest — debased liquidity remains a problem.