After months of speculation and deliberation, the new management team at the Warsaw Stock Exchange has finally revealed its plans for the bourse’s future.
Two things stand out. First, a merger with the Vienna-based CEE Stock Exchange Group has been ruled out, at least for the foreseeable future. Second, the WSE’s new chief executive, Pawel Tamborski, is as determined as his predecessors to turn Warsaw into a regional financial hub.
With regard to the Vienna tie-up, or lack thereof, the WSE’s decision is almost certainly the right one. Merging exchanges is a complex and sensitive business, as leading global players such as Deutsche Börse, NYSE Euronext and the London Stock Exchange have found to their cost in recent years.
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WSE’s decision is in sharp contrast to the prevailing orthodoxy a decade or so ago, when it was envisaged that all listings would gradually migrate to a few regional hubs. What has driven this shift in opinion is the growing realization that, for the vast majority of firms, the only way to ensure an engaged, informed and loyal following is by listing domestically – particularly for companies from smaller markets, which may be big, newsworthy fish at home but very small fry when they venture abroad. In this context, the WSE’s decision to continue pursuing companies from elsewhere in central and eastern Europe (CEE) looks a little dated. It is true that Warsaw has a much larger and more international investor base than any other stock exchange in the region. There is, however, no reason to think that purchasers of Polish stocks will be equally enthusiastic about buying Bulgarian IPOs, particularly now that the private pension funds that sustained Warsaw’s primary market for the best part of a decade have had their wings clipped.
It is also hard to see why firms would want to leave their home markets, where they are known and appreciated, for the relatively uncharted waters of Warsaw – unless they are too large for the domestic investor base to absorb, in which case London or Frankfurt would offer access to far broader and deeper pools of demand.
The WSE is a highly successful bourse with, as Tamborski and his team have identified, excellent opportunities for organic growth in segments such as corporate bonds, energy commodities and derivatives. Focusing on those areas is likely to prove a much more profitable use of their time and resources than trying to entice a few Macedonian and Hungarian firms away from their domestic markets.