FTSE Russell promotes Poland to league of developed markets

FTSE Russell promotes Poland to league of developed markets
By Wojciech Kosc in Warsaw September 26, 2018

FTSE Russell, the UK provider of stock market indices owned by the London Stock Exchange, moved Poland to the “developed market” category on September 24.

The promotion is the first FTSE Russell has made in nearly a decade and also marks the first ever upgrade to developed status for a country located in CEE.

Poland is the region’s biggest economy by far, having also increased its per capita income from around a third of the Western Europe in early 1990s to 70% in 2017. Poland’s economy more than doubled in size since joining the EU in 2004.

Alongside with the new country status, 37 Polish companies – such as state-controlled lenders PKO BP and Bank Pekao, power corp PGE, and fashion company LPP – will also land in the developed market pool.

“Poland’s promotion to developed market status within FTSE Russell’s global equity benchmarks is a significant achievement,” Reza Ghassemieh, chief research officer at FTSE Russell, said in a statement. 

“The Polish Ministry of Finance and the Warsaw Stock Exchange have long been committed to improving Poland’s capital markets infrastructure and strengthen its economy and today marks the culmination of their efforts to meet the rigorous criteria needed for this classification,” Ghassemieh added.

“Poland’s reclassification will spark the interest of new investors in Polish issuers and open enormous opportunities for the entire capital market. I do believe that in the long term it will attract bigger capital inflows to GPW,” said Marek Dietl, CEO of the Warsaw Stock Exchange.

That said, Polish companies, which were heavyweights in emerging markets indices, will now be comparatively small among corporates from world’s most developed markets like the US or Germany.

Poland’s ascent to the top flight of the world’s economies could also result in greater scrutiny of its economy, the legal environment, and the shortcomings of the WSE. 

Warsaw’s conflict with the EU over the government’s reforms of the judiciary could make investors have second thoughts about getting involved in Poland because of risks associated with politicised courts.

The WSE’s long-time problems of falling turnover or companies delisting in droves – 18 in 2017 and 20 this year by mid-September – are also challenges to be addressed.