Jan Cienski in Warsaw -
The Warsaw Stock Exchange is curbing its imperial ambitions and focusing on developing its national market after deciding against pursuing a merger with its rival in Vienna, according to an updated strategy document released on October 30.
“We have suspended the Vienna project, but we do want to be international, we want to be the exchange of first choice for investors and issuers from central eastern Europe,” said Pawel Tamborski, the president of the WSE.
As a result, the WSE is planning to dramatically increase the dividend it pays shareholders, saying in a regulatory filing that dividends will rise to more than 60% of net profits from an earlier 30-50%, or 2.40 zlotys per share this year and 2.60 zlotys a share in 2015.
“We do not want to function like an investment fund,” said Tamborski . “If there are going to be acquisitions, then they will be closely tied to our competences. For the moment we don’t see such investment targets.”
Tamborski made his comments as the WSE released its results for the third quarter, showing a net profit of 30m zlotys (eur7.1m), a 15% increase on the same period a year earlier, due in large part to increased profits on its commodities and financial markets trading as well as cost cuts.
Shares in the WSE soared in trading on Thursday, rising 11% to 41.90 zlotys.
Tamborski, a former investment banker and deputy treasury minister, took over the WSE in July. One of his first decisions was to scrap merger talks with Vienna, an idea pushed hard by his predecessor Adam Maciejewski, and by Ludwik Sobolewski, who headed the WSE from 2006 to 2013 before being forced to leave over a scandal. Sobolewski now runs the Bucharest stock exchange.
Sobolewski and Maciejewski had overseen WSE's rise, overtaking Vienna and become the region’s largest exchange. They felt that the next logical step was for Warsaw to take part in the broader trend towards exchange consolidation by amalgamating all trading in central Europe under its umbrella.
However, the actual mechanics of incorporating Vienna proved to be hugely difficult. The two exchanges run different trading systems, and there was little obvious advantage to a merger.
Instead, Tamborski plans to push hard to attract new listings to the WSE, both from foreigners interested in Warsaw and, more crucially, from the large number of successful Polish companies which do not yet have a presence on the Warsaw bourse. The idea is for an IPO to be a normal part of the development of a local company, he said during a recent conference on central European capital markets. The goal is for the exchange to have more than 550 listings by 2020, up from 466 today.
He also wants to focus much more strongly on diversifying the WSE, including strengthening NewConnect, the exchange’s alternative market for small listings, and broadening its Catalyst bond trading platform. The exchange should also be made more attractive to retail investors, who have shied away from investing in stocks in recent years, as well as increasing liquidity, a frequent complaint of mid-sized companies listed on the WSE.
“We want our group to work in an integrated fashion,” Tamborski said. “We see a lot of potential synergies in costs and revenues. The problem is low liquidity. Investors are looking for new markets, which is why we want our market to be friendlier to participants and more resistant to the competition.”
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