Warsaw bourse proves it's first among equals

By bne IntelliNews November 2, 2010

Leah Gasson in London -

Poland has confirmed its status as the host of the region's premier stock market as the IPO of the Warsaw Stock Exchange (WSE) will value the bourse at almost €500m.

Ahead of the final allocation of shares on November 4, the Polish treasury revealed on October 29 that it has set a debut price of PLN46 for each share of the WSE for institutional investors, which will raise more than PLN1bn (€300m) and value it at €486m.

The Treasury said demand was 25 times oversubscribed from institutional investors, including Polish pension funds (OFF), Polish investment funds (TFI) as well as international investment funds, sovereign wealth funds and endowment funds. Retail demand was also strong, prompting the government to increase the amount of shares offered to retail investors from 25% to 30% at a price of PLN43 per share.

The popularity of the shares didn't come as a surprise to WSE President Ludwik Sobolewski - prior to the IPO, he expressed confidence in the potential of the bourse, citing its performance in the wake of the global economic crisis as evidence of its strength. "The situation changed in our favour - all the markets are in stagnation and regression, WSE is the only market doing well," he said.

National treasure

The WSE has certainly been well managed - it now the largest of the stock exchanges in the region after overtaking the bourses in Vienna and Athens, and is regarded as one of the most innovative, attracting a record number of IPOs; this year, it has had 18 new listings raising a total of €3.4bn.

The government has also done its bit to help. Polish governments have long treated the private sector OPFs, a pillar of the decade-old reformed pension system, as quasi-public institutions, and forces those pension funds to restrict themselves to investing a maximum of 5% of their assets outside of Poland. The pension funds, which have about PLN170bn under management, have thus poured immense sums into the market, which in the go-go days before the global economic crisis gave Polish shares some of the highest valuations in the region, in turn attracting more money from global emerging market funds. The government has also been busy privatising large state firms on the WSE. Earlier this year, the sale of Tauron, a power generator, raised PLN5.1bn, while the sale of PZU, an insurance company, raised PLN15bn.

So what now? Sobolewski is continuing to push the WSE as the destination for foreign companies in the region to list, citing Ukraine as a key target - "they have inefficient market capital and this is where we have a chance."

The success of the WSE has drawn interest from other CEE exchanges. Pre-crisis, Vienna had displayed an interest in buying the bourse but that notion has been flipped entirely on its head. This doesn't, however, mean that a tie-up between the two exchanges is out of the question - the theory is there but the logistics are not, muses Sobolewski. "It would be good, but nobody has an idea how it can be transposed to concrete business projects."

The notion of a unified exchange would be looked on kindly by investors - German asset managers have voiced hopes of this and Sobolewski agrees that "it will be good to have everything in one place."

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