The Warsaw Stock Exchange eyes ditching its emerging-market status and an upgrade to developed markets within three to five years, according to Chief Executive Officer Tomasz Bardzilowski.
His prospective timeframe for the reclassification by index provider MSCI Inc. gives Poland time to revive public interest in stocks and bring more companies to the region’s biggest capital hub, the CEO said in an interview.
The desired move would be the first among stock exchanges in formerly communist eastern Europe, opening over 400 Warsaw-listed firms to more investors, including funds tracking developed-market indexes. The comments come amid a rally in Polish shares, with the benchmark WIG20 gauge up 50 percent in dollar terms this year.
‘We are quite aware that in the emerging market universe we are a much bigger fish than we would be in MSCI’s developed basket,’ he said. ‘We need to work to avoid staying below the radar screens of the vast majority of investors.’
Bardzilowski has an ally in trying to lure people back to equity investing. Finance Minister Andrzej Domanski, a former stock fund manager, in August unveiled tax incentives based on a Swedish model, seeking to rekindle an ‘equities culture’ that thrived in past decades.
Seven years ago, Poland was upgraded to a developing market by another index provider, FTSE Russell, which granted Warsaw-listed stocks a weighting of 0.1 percent. Meanwhile, the nation’s shares currently account for 1.1 percent of the MSCI emerging-market stock index.
Nearly zero
A potential weight close to zero could cause make it difficult for meaningful flows to reach Polish equities, according to Pawel Wieprzowski, a stock-fund manager at PKO TFI SA, the country’s largest mutual fund.
Assets under management by exchange-traded funds that use MSCI developed-market indexes are roughly three times as large as those that track emerging-market gauges, according to data from the company.
The market value of stocks with primary listings in Warsaw tops 1.05 trillion zloty ($287 billion). That’s more than the firms traded in Prague, Budapest and Bucharest combined and twice as big as in Vienna. Liquidity is still low but it’s increasing, especially during this year’s rally.
In its latest review in June, MSCI pointed to the lack of English-language information from Polish issuers, the scarcity of stock lending and short selling as well as inadequate rules regarding the registry representation for foreign owned shares.
The bigger problem for Bardzilowski, who’s been at the helm of the Warsaw stock exchange since March 2024, is enticing companies to list in Warsaw. Appetite for selling state assets has faded, with politicians from across the spectrum talking up the merits of state ownership.
Bardzilowski is betting on the government’s tax plan to widen the domestic investor base, which will make the stock exchange more resilient to global flows. This in turn will lure more companies to float in Warsaw and boost the market’s capitalization beyond roughly a quarter of the country’s gross domestic product.
With eastern Europe quickly ramping up military spending following Russia’s full-scale invasion of Ukraine three years ago, Bardzilowski expects more defense-focused firms to list in Warsaw. The exchange is meeting entrepreneurs across Poland to drum up interest in listings.
The record scale of secondary offerings this year is a key argument, according to Bardzilowski, showing that once a company is listed, it may repeatedly raise capital through the bourse.