Stock exchanges have been a great source of returns for investors over the years. The ASX in Australia, ICE (owner of the NYSE) in America or the London Stock Exchange Group in the UK all enjoy near-monopolies in facilitating the trading of stocks, derivatives and commodities in their respective countries. In this article, the authors make the case for a less-discussed stock market that may enjoy a similar position in due time – Poland’s major stock market, the Warsaw Stock Exchange.
Poland wouldn’t be the first country that comes to mind when you think of fast growing economies. Yet, in the past 30 years it has been the fastest growing economy in Europe and has enjoyed a higher growth rate than South Korea, Singapore and Thailand in that time. Household assets have quadrupled since 2006, yet most of that money has gone to savings and deposits, only 5% of household assets are in equities (compared to more than 30% in the US).
Right now, the company offers a 6% dividend yield and trades on a price-to-earnings ratio of 12 – pretty unbelievable metrics for a near-monopolistic stock exchange. There are reasons for this – the Polish political situation is problematic and Poland’s economy has a number of risk factors (for example, nearly all Polish exports end up in the EU, creating counter-party risk). However, if the Warsaw Stock Exchange is able to perform in the way some of its more developed market peers have done – ASX (Australia), ICE (US), LSE (UK), TMX (Canada) – then it could be a compelling story for years to come.
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