The FINANCIAL --
The Warsaw Stock Exchange is open to cooperationwith the Georgian Stock
Exchange, its President and CEO Adam Maciejewski told The FINANCIAL.
Also Georgian companies are welcome to list at WSE, as the stock
exchange continuesits long-standing focuson emerging markets.
“We would welcome Georgian companies on our exchange. If there is will on both sides, there is also the right motivation to meet all listing requirements. We are encouraging Georgian companies to come to Poland,” Maciejewski said.
WSE is open to Georgian companies and at the same timeinterested in supporting the development of the Georgian capital market. “When we started our exchange, our capital market, over 22 years ago, we were very small. We have a significant track record in developing the market and in avoiding big risks. It does not mean that we know how to avoid any given risk. We probably made some mistakes along the way and that is why our advice would be useful for Georgian companies and the stock exchange,” he added.
According to Maciejewski, by deciding to list at WSE, Georgian companies will have access the largest institutional investor asset pool in Central and Eastern Europe and will enjoy significant ‘visibility’ among potential investors and business partners.
Q. The Warsaw Stock Exchange now lists the greatest number of companies in the entire region. It is also leading in terms of debuts. Does that mean that the WSE aspires to become the leader in Central and Eastern Europe?
A. We must bear in mind the specific economic role of a stock exchange. It is thanks to the stock exchange and other institutions of the capital market that we can influence the structure of corporate financing and household saving portfolios. We can also ensure better transparency of business operations. As WSE we strive to excel at both of those roles. The position that we hold in the region is the result of our efforts. Across the CEE region - covering Poland, Austria, Hungary, and the Czech Republic - in Q1 of 2013 we accounted for over 60 percent of share trading and 89 percentof volume in index futures.Over the same period of time, our share in the value of capital raised stood at virtually 100 percent. Also in terms of market capitalization of all listed companies, we have a 50 percent market share.
Q. It is said that the number of Georgian listings on the Warsaw Stock Exchange is set toincrease. What is the interest of the Warsaw Stock Exchange in getting Georgian companies to join, and at the same time, what will the benefits be forthe Georgian companies?
A. In general, companies should develop and assess their need for capital. The question is where this capital should be coming from. One option is frombank financing. The other is the capital market. In case of the capital market, we call it equitisation of the economy. It is not a healthy structure ifthe banking sector is much strongerthan the capital market orvice versa. A balanced model is alwaysthe most effective.
As I understand, Georgia does have a banking sector perfectly capable of providing capital for local companies but lacks a strong capital market. When in need of equity investors, Georgian companies are forced to go abroad. The question is then: where? They should probablychoose markets which are not that far away andina more or less similar cultural environment. Markets which are well-regulated and safe, and have already attracted the interest of international institutional investors and international companies. I am convinced that Warsaw is such a market. Many international investors are interested in Poland, precisely because Warsaw is already perceived as the hub of Central and Eastern Europe.
Q. The Government of Georgia intends to develop the Georgian Stock Exchange based on WSE’s experience. What do you think, how could WSE help the Georgian Stock Exchange to develop?
A. It is still too early to say how we can do this, but I am certain that after meeting withthe Georgian authorities we could create a stronger framework of cooperation that would benefitboth sides. It would result in a more interesting proposition for investors and a better service to investors in both markets. To thrive and expand in the current, very competitive, environment we should be open to international cooperation. We are currently living in globalised economies so we should think globally and forget about imposing any restrictions.
Q. How profitable could it prove to be for Georgian companies to be listed on WSE?
A. We do not know yet which companies could be listed on WSE and therefore we cannotdiscuss theirpotential gains in detail. There is a lot of capital interested in diversification of risk in Poland. It means that capital in Poland is looking for new, varied assets. We are looking for interesting investment opportunities from other geographies.
If Polish institutions are interested in investing in Georgian companies, the way to access capital will be quite straightforward. It will therefore be easier to finance their growth. If Georgian companies would like to be more visible in our market or internationally, a listing at WSE certainly facilitates that. International interest in the Georgian market will grow, not only for those companies, but forthe Georgian economy and for the country in general. Listing at the WSE is also a matter of increasing trust in your business. Public companies are much more transparent, they provide significant amount of information and investors are better protected by this knowledge. These companies will be managed in a better way than if they were to remain private.
Q. To be listed on the main market of the London Stock Exchange is very favourable for Georgian companies. What advantages could Georgian companies getfromjoiningthe Warsaw Stock Exchange?
A. We are doing our best to propose listing solutionsthat are cost-effective in comparison withother markets. Our trading floor, brokerage houses, banks, and law firms are very attractive in terms of costs - we provide world class service at still very affordable prices.This is something that a lot of our companies value. However, in my opinion there are other factors of even greater importance than listing costs. The London Stock Exchange is a very large market with a lot of companies. It is difficult for small and medium-sized companies to be recognized on a market where the main focus is constantlyon big companies. Imagine if you have 2,000-5,000 companies and you receive so many reports and analyses on these companies, would you want to focus on something which is at the end of the list? No, the interest is focused on the companies from the top.
WSE is a mid-sized exchange and mid-sized companies will gain better exposure here. We are a local market with leading position in Central and Eastern Europe. Of course, it does not mean that the only possibility for Georgian companies is WSE. But my understanding is that companies should carefully consider where theywant to be listed. The decision of Georgian companies to list onWSE can seamlessly connect with their business goals. If they would like to do business in Poland, the CEE region or even the EU as a whole, then listing in Warsaw is a reasonable choice and many companies from the region have followed that path.
In the modern economy we should let the companies decide what to do and where to go. A free market economy should allow all entities the freedom of choice, which should also include the freedom to choose the places to raise capital and list on a public market. Russian companies for example are certainly going to be listed on various stock exchanges and I daresay that their liquidity is bound to be higher on local markets. Warsaw’s key strength is chiefly a strong base of local investors interested in the possibility of diversifying their investment portfolios. Strong pension funds are another. Interesting companies do not get lost in the thick of thousands of other instruments. On the contrary, on a stock market of this size they are very likely to easily attract the attention and interest of both investors and analysts.
Q. Ukrainian companies eagerly entered WSE, yet many of them disappointed investors. Could this mean that the door is too open to foreign businesses?
A. Ukraine continues to be one of our most important markets, though the country’s economic difficulties have obviously adversely affected the condition of Ukrainian companies. However, every crisis and every recession will be over at some point. We have our office in Kiev and we certainly have no intention of closing it down. Its undeniable success is best measured by the fact that the highest number of foreign companieslisted on the WSE is from Ukraine . On the other hand, however, we will certainly not endeavour to attract any given foreign company. Instead, we wish to have only companies with a solid financial standing and an interesting equity story.