Post on 30-Jul-2020
International Capital Markets Conference 2015
Building Regional Capital Markets
Session 1: Capital Market Integration: International Experiences
Adam Maciejewski
Bangkok, Thailand
November 30 2015
LESSONS LEARNED
You need
VISION needs
LEADER
HAVE DREAMS
MAKE THEM POSSIBLE
NO FEAR
ACT
TAKE RISK but
MANAGE IT
BE ANTIFRAGILE
Nassim Nicholas Taleb
„Antifragile: Things That Gain from Disorder”
INTUITION
COOPERATE
TRUST
POLAND
Central European
perspective
24,1%
13,5%
5,0%
8,0%
6,5%
2,3%
4,1%
4,0%
3,9%
2,4%
0,2%
-0,1% -2,2%
-2,8%
-3,2%
-4,0%
-5,0%
-5,2%
-5,2%
-7,4%
-8,9%
-10,6%
-25,8%
-4,0%
Poland:
ca. 36% of total GDP of 13
EU Members States that
joined after 2004.
The only EU country that
had a positive growth rate
during the recent crisis
Budgetary deficit and public
debt to GDP ratio are
trending downwards
Source: Eurostat
Cummulative
GDP growth
2007-2014…
15
... growing faster then other CEE economies…
…and the trend continues its upward climb
Poland is the 8th largest economy in the EU...
... gradually converging to its Developed Markets peers
2014 2015e 2016e 2017e
Real GDP (%yoy) 3,3% 3,5% 3,6% 3,5%
Nominal GDP (USDbn) IMF Forecast 546,6 491,2 517,0 550,8
GDP per capita (PPP USD) IMF Forecast 25 105 26 210 27 530 29 100
Household consumption (real, %yoy) 3,0% 3,4% 3,3% 3,3%
Consumer prices (avg, %yoy) 0,0% -0,7% 1,5% 2,0%
Unemployment rate (avg%) 9,0% 10,6% 9,6% 9,2%
Export of goods (%yoy) 5,7% 7,2% 6,5% 5,1%
Import of goods (%yoy) 9,1% 7,5% 7,0% 5,9%
Economic forecasts at a glance
Source : Bloomberg market consensus forecasts as of 8/09/15
3 860
2 945 2 847
2 148
1 407
866
570 547 535 500 437 246 238 230 206 200 137 57
89%
129% 136% 144% 148%
160% 162% 169% 170% 187%
221% 228% 245%
0%
5%
10%
15%
20%
25%
0% 20% 40% 60% 80% 100% 120% 140%
IMF Fore
cast
2015-2
020
Actual 2000-2014
Note: Nominal GDP as of 2014, USDbn Source: World Bank
Note: Cumulative GDP growth 1991-2013 Source: Ministry of Finance
Note: Forecasts by IMF, Thompson Reuters, cumulative GDP growth rates
Macroeconomic indicators look strong
Good situation on the labour market supports consumption
PMI readings have been volatile but show an upward trend
Unemployment rate close to its historical minimum
Stable growth in real wage
Flat trade balance is expected in 2015
Consumer confidence has recovered significantly
987
0
200
400
600
800
1000
1200
54,5
42
44
46
48
50
52
54
56
58
2012 2013 2014
-75
-58
-57 -56
-53
-39
-50
-70
-92
-40
-55
-65
-45
-8 -11
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
10,1%
-1400
-1200
-1000
-800
-600
-400
-200
0
200
400
600
800
0%
5%
10%
15%
20%
25%
Unemployment change ('000) yoy (RHS) Unemployment rate (LHS)
0
1
2
3
4
5
6
7
8
9
95
96
97
98
99
100
101
102
103
2010 2011 2012 2013 2014 2015
Germany Poland Euro area (19 countries)
50
Note: PMI index for Poland Source: Bloomberg as of H1 015
Note: Consumption change yoy Source : Bloomberg as of H1 015
Note: Trade balance (PLNbn) Source : GUS (National Statistics Office)
Source : Bloomberg, RCB Note: Average monthly real wage (EUR) Source : Bloomberg as of H1 015
Note: Consumer Cofnidence Index Source : OECD Data
Poland enjoys a very stable financial environment
Cumulative Public Debt growth since 2008 (%)
Moody’s S&P Fitch
Poland A2 A- A-
Israel A1 A+ A
South Korea
Aa3 A+ AA-
Italy Baa2 BBB-u BBB+
Spain Baa2 BBB BBB+
Portugal Ba1 Bbu BB+
Public Debt/GDP (%)
Bond yield CDS
Ratings
EUR/PLN
174
136 133 124
105 97 97 94 91 88 84
79 77 75 74 68
58 50
99
67 65 61
56
47
35 32 32 29 29 28 28
24 21 18 17 15
12
5
2,7
2,1
0,7 0
2
4
6
8
10
12
14
Poland 10y yield Spain 10y yield
Germany 10y yield
92,0
104,1
167,8
24,2 32,0
44,1
58,7
73,7
96,6
112,8
0
20
40
60
80
100
120
140
160
180
6m 1yr 2yr 3yr 4yr 5yr 7yr 10yr
Korea Israel Spain
Italy Poland
4,23
3,4
3,6
3,8
4
4,2
4,4
4,6
2010 2011 2012 2013 2014 2015
Source: Bloomberg as of 09/2015 Source: Bloomberg as of 09/2015 Source: Bloomberg as of 09/2015
Source: Thompson Reuters as of 09/2015 Source: Thompson Reuters as of 09/2015 Source: Moody’s, S&P, Fitch as of 09/2015
Food & Livestoc
k 10,9% Chemica
ls 9,1%
Commodities 19,7%
Machines,
appliences
37,8%
Industrial
products 14,0%
Other 8,6%
Food & Livestock
7,5%
Chemicals 6,8%
Commodities
24,8%
Machines, appliences
34,2%
Industrial products 18,3%
Other 8,4%
18
…with euro zone still representing more than 50% of Polish exports, where Germany accounts for 25% and Russia only 6%
Exports have been a major contributor to GDP growth
Geographical and sector diversification of Polish exports is taking place…
Historically strong export correlation with Germany… … but little direct exposure to China
Germany
NL
IT
FR
BE SK
AT ES Others
Eurozon
e
28%
Other EU 14%
Rest of World 32%
Germany
NL
IT
FR
BE SK
AT ES Others Eurozone
27%
Other EU 23%
Rest of World 25%
Export share (2014) Import share (2014)
2014 Exports USDbn
2014 Export to China USDm
%of GDP % of Exports
Poland 194 2 236 0,4% 1,2%
Czech Rep. 157 2 035 1,0% 1,3%
Russia 498 38 100 3,1% 7,7%
Germany 1 733 99 684 2,6% 5,8%
-20
-10
0
10
20
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PL monthly exports change %yoy DE exports change %yoy DE GDP change %yoy
2000 2014
Source: GUS, Bloomberg end of 2014
Source: GUS Source: GUS
Nominal GDP by sector & funding
0
2
4
6
8
10
12
14
16
18
20
0
200
400
600
800
1000
1200
1400
1600
1800
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Agriculture Manufacturing Energy
Construction Trade Financial service
Public sector Other FDI EUR '0bn (LHS)
EU Funds EURbn (RHS)
Source: GUS, ewaluacja.gov.pl (EU), NBP(FDI)
Poland is going to receive EUR82bn
in co-funding from the EU in 2014-
2020, 19% more than the
EUR69bn in 2007-2013.
Approximately EUR28bn of this
amount is to be spent on
infrastructure, broadly the same as
in 2007-2013.
FDI stands at 1.5% of GDP and is
expected to increase in 2015e
(EUR 6.5 bn net) and 2016e (EUR
7 bn net).
EU funding to boost medium term potential
EURbn PLNbn
POLAND
Capital market
Public vs Private
22
Emerging from … Emerging from … Emerging from …
Emerging from … Emerging from …
Emerging from … Emerging from … Emerging from …
Emerging from … Emerging from …
Financial assets in Poland: +190% over 10 years
Source: National Bank of Poland
0%
5%
10%
15%
20%
25%
30%
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
Foreign investors (PLN bln)
Domestic investors (PLN bln)
Foreign investors share (%, right
hand scale)
Loan
s,
Bank
deposits,
Cash
46% Fixed
income
16%
Equit
ies 26%
Othe
r
12%
Financial assets structure
(as at 2014)
Polish equity market is catching up with DM
Market Cap ranking shows further growth opportunity
Poland is among smaller markets but with substantial growth potential
Company Market Cap
EURbn
Equivalent rank
GPW LSE DAX
Pekao 9,67 1 70 40
PGNiG 8,87 2 72 41
PZU 8,76 3 73 41
PGE 6,61 7 89 55
PKN Orlen 7,34 5 82 48
KGHM 3,68 10 148 74
Cyfrowy Polsat 3,41 11 157 76
LPP 3,36 12 160 76
OrangePL 2,24 14 198 88
Grupa Azoty 2,07 15 204 92
CCC 1,47 19 262 112
1%
2%
4%
8%
16%
32%
64%
128%
256%
1% 2% 4% 8% 16% 32% 64% 128%
Market
Cap
to
GD
P
"E
qu
itiz
ati
on
" (
20
14
)
Trading Velocity (2014)
Developed
Advanced Emerging
Frontier Emerging
Market Cap has grown by 37% since
2009
Free float has increased from 39% in
2009 to 48% currently
Turnover velocity in 2014 is at the level
of 31% vs Europe at 57%
Source: Thompson Reuters Source: Bloomberg as of 09/2015
WSE: One of the leading medium-sized exchanges in Europe
*Source: WSE paper „OPINION OF THE WARSAW STOCK EXCHANGE ON THE CAPITAL MARKETS UNION PROJECT”
0 100 200 300 400
MICEX/RTS
Oslo Børs
Warsaw …
Irish Stock …
CEESEG - …
Athens …
CEESEG - …
Bucharest …
CEESEG - …
CEESEG - …
Bulgarian …
Peer Exchanges Mkt
Cap (EUR bn, 2014)
0 100 200 300 400
MICEX/RTS
Borsa Istanbul
Oslo Børs
Warsaw …
Irish Stock …
CEESEG - …
Athens …
CEESEG - …
Bucharest …
CEESEG - …
CEESEG - …
Bulgarian …
Peer Exchanges
Equity Turnover (EUR bn, 2014)
no data
no data
17
35
3
2
0
0
0
0
0
0
0 10 20 30 40
MICEX/RTS
Borsa Istanbul
Oslo Børs
Warsaw …
Irish Stock …
CEESEG - …
Athens …
CEESEG - …
Bucharest …
CEESEG - …
CEESEG - …
Bulgarian …
Peer Exchanges
Number of IPOs (2014)
71%
33% 49%
36%
95% 79%
81%
72%
68%
72%
63%
70%
70%
56%
82%
76%
95% companies that are listed
at GPW have market cap lower
than 0.5 bn EUR
Polish mid-caps are significantly
diversified in terms of sectors
52 listings from non-Polish
companies
Source: FTSE
Warsaw is Europe’s SME listings hub
Main Market 422 domestic companies 52 foreign issuers
NewConnect 423 domestic companies 11 foreign issuers Catalyst 195 issuers (incl. State) 491 listed non-Treasury issues
Market cap: EUR 144 bn EUR 168 bn Market cap: EUR 1,3 bn Value of non-Treasury issues: EUR 14,6 bn
Strong flow of new companies to the market Issuers’ activity on GPW markets 1
Acquisition of issuers
On the radar: family companies, PE funds, CEE companies, state-owned companies and their subsidiaries
400 of 500 Polish companies with the highest revenue are not listed -> more than 100 may potentially be interested in listing on the Exchange
Capitalisation of domestic companies/GDP (%)
Significant European exchange by number of listed companies
203 230 255 284 351 374 379 400 426 438 450 471 474
24
84 107
185
351 429 445 431 434
0
150
300
450
600
750
900
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2015
Main Market NewConnect
1 As of the end of June 2015
77
63
36
72
61
15
46
28
0,2
1992 2002 2012 1992 2002 2012 1992 2002 2012
World European Union Poland
Source: GPW
Source: GPW Source: GPW
Source: GPW
Foreign companies / WSE regulated market
9 16 22 44 65 83
143
198 221 225 230 216 202
225 248
272
328 349 354 373 387 395 403 420 427 1
5 7
12
23 25 25
27 39 43 47
51 52
0
50
100
150
200
250
300
350
400
450
500
Domestic companies Foreign companies
Source: WSE
7 13
20 16 23
29 27 30 26
31
36 35
44 43
7 8
33
44
56 51
67 72
34 38
2008 2009 2010 2011 2012 2013 2014 H1 2015
Domestic shares Other assets
13 17
20 16
21
31 31 32
2008 2009 2010 2011 2012 2013 2014 H1 2015
Equity and Mixed funds AUM EUR bn
AUM of investment funds (EUR bn) AUM of Open Pension Funds – OFE (EUR bn)
Penios funds’ share in GPW free float Pension funds’ shares in turnover on GPW
40% 39%
44% 43% 46% 47% 48%
28% 33% 33% 36%
39% 43% 42%
2008 2009 2010 2011 2012 2013 2014
GPW free float OFE's share in free float
8,2 8,0 8,0 9,8
11,6
18,9
27,6
21,5 20,3
28,0 30,0
21,7
29,4
23,1
13,6%
16,7%
12,0%
8,8%
6,4% 5,8% 6,0% 6,7% 6,1%
6,8% 6,0% 5,8%
6,7% 5,6%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Strong domestic institutional investor base
Source: PFSA, GPW analysis
Source: PFSA Source: PFSA
Source: PFSA, GPW analysis
Strong economy & advanced stock exchange attract international investors
*Source: WSE paper „OPINION OF THE WARSAW STOCK EXCHANGE ON THE CAPITAL MARKETS UNION PROJECT”
GDP per capita vs. Size of the capital market
10-year cumulative GDP growth in Poland compared to the EU countries, Norway, Switzerland and Iceland
International investors provide liquidity and balanced shareholders’ base
Foreign
51%
Institutional
37%
Individuals
12%
Share in turnover on the GPW (1H 2015) Portfolio turnover ratio for selected investors on GPW
GPW stakeholders by market capitalisation of AUM
Year
Domestic Investors
International investors
Pension Funds Investment Funds Individual Investors
2008 28% 71% 62% 42%
2009 26% 92% 134% 50%
2010 21% 73% 89% 53%
2011 19% 80% 100% 57%
2012 13% 69% 89% 44%
2013 14% 75% 83% 48%
2014 9% 60% 62% 41%
International
Investors
42%
Pension Funds
22%
Government
and municipals
16%
Households
7%
Investment
funds
7%
Non-financial
corporates
5%
Others
1%
Source: National Bank of Poland
Source: GPW Source: GPW
Origin of GPW investors (Free float by geography)
Source: GPW
Easy access to trading
30 local + 26 GPW foreign members from 11 countries Most active on GPW past year (EOB+block trades)
Broker Market share (%)
Eq
uit
ies
1 Bank Handlowy (Citigroup) 11
2 DM PKO BP 10.7
3 Goldman Sachs International 7.6
4 DM BZ WBK (Santander) 6.6
5 IPOPEMA 6.2
6 Wood & Company 5.9
7 DB Securities (Deutsche Bank) 5.2
8 DM mBank (Commerzbank) 4.6
9 Merrill Lynch International 4.3
10 Credit Suisse Securities 4.3
Deriv
ati
ves
1 DM BOŚ 22.6
2 DM mBank (Commerzmbank) 17.8
3 DM BZ WBK (Santander) 9.5
4 Erste Securities 8
5 Noble Securities 5.9
6 DM PKO BP 5.4
7 CDM PEKAO 3.9
8 Raiffeisen Bank Polska 3.7
9 Alior BM 2.7
10 ING Securities 2.2
Credit Suisse, JP Morgan, Goldman Sachs, HSBC, Bank of America Merrill Lynch, Liquidnet Europe, UBS, Wedbush Europe, Morgan Stanley
Raiffeisen Centrobank
IP Intercapital Markets
Renaissance Securities, Dragon Capital, SIB (Cyprus) Ltd.
Wood & Company, Cyrrus, Fio Banka
Societe Generale SA, BNP Paribas Arbitrage SNC
UniCredit Bank
Concorde Securities, Equilor Investment
ING Bank
Orion Securities
Source: GPW data
Remote brokers ad liquidity to the market
2009
2015F
0 10 20 30 40 50 60 70 80 90 100
WSE Electronic Order Book (EOB) equity trading, EUR bln
Domestic brokers Foreign (remote) brokers
*Source: WSE
FTSE Quality of markets criteria for Poland
Criteria Status of Poland
World Bank GNI Per Capita Rating, 2013 +
Market and Regulatory Environment
Formal stock market regulatory authorities actively monitor market (e.g., SEC, FSA, SFC) +
Fair and non-prejudicial treatment of minority shareholders +
Non or selective incidence of foreign ownership restrictions +
No objections or significant restrictions or penalties applied to the investment of capital or the repatriation of capital and income
+
Free and well-developed equity market +
Free and well-developed foreign exchange market +
Non or simple registration process for foreign investors +
Custody and Settlement
Settlement - Rare incidence of failed trades +
Custody-Sufficient competition to ensure high quality custodian services +
Clearing & settlement - T + 3 , T + 5 for Frontier +
Stock Lending is permitted +
Settlement - Free delivery available +
Custody - Omnibus account facilities available to international investors Restricted
Dealing Landscape
Brokerage - Sufficient competition to ensure high quality broker services +
Liquidity - Sufficient broad market liquidity to support sizeable global investment +
Transaction costs - implicit and explicit costs to be reasonable and competitive +
Short sales permitted +
Off-exchange transactions permitted +
Efficient trading mechanism +
Transparency - market depth information / visibility and timely trade reporting process +
Derivatives
Developed Derivatives Market +
Best in class IT infrastructure
35
Successfully implemented in April 2013
Trading system developed by NYSE Technologies
Trading technology - key data:
Number of messages/ second (trading day) 20,000
Number of trades/ day fully scalable
Number of messages with market data/ day fully scalable
Internal latency 0.15ms
Telecommunication providers e.g. SFTI, TNS, Orange, ATM (Linxtelecom), Exatel
Trading applications offered by global ISVs including Fidessa, Ullink, Sungard, ARQA, ORC, LIST, MetaQuotes, Ingalys, CQG
Global Market Data Vendors have access to the GPW market data stream
Provided on premises leased by GPW (in Warsaw) at a professional Data Centre developed and managed by a third party
Co-location service is available to: Exchange Members and their clients, Data Vendors and service providers
Universal Trading Platform (trading system)
Connectivity
Co-location services
Source: GPW
SERVING THE ECONOMY
SERVING THE CLIENTS
*
FINAL CONSIDERATIONS
I. CARE ABOUT LOCAL ECONOMY & DEMOGRAPHY
II.SUPPORT LOCAL COMPANIES
III.SUPPORT INNOVATION (eg corporate private ventures, crowdfunfing, support services for startups)
IV.CAPITAL MARKET - A TOOL SUPPORTING MORE RISKY BUSINESSES – CARE ABOUT CM
V. DO NOT FAVOUR PUBLIC/PRIVE MARKET – ONE IS MORE TRANSPARENT & DEMOCRATIC, THE OTHER ONE IS MORE EFFECTIVE
VI.BUILD RELIABILITY / BE PREDICTABLE (RULES & REGULATIONS, PROCEDURES, IT…)
38
CU in Poland
-41 + 40 º C