An exclusive interview of Deputy President of the Warsaw Stock Exchange, responsible for the IPO market Paweł Graniewski with Interfax-Ukraine Question: Six years have passed since debut of Ukrainian companies at the Warsaw Stock Exchange (WSE) and we already have 12 companies listed. What positive and qualitative changes can you name in this process, and what are the negatives? What are the strengths of Ukrainian companies, and what do they have to improve? Answer: The biggest representation of companies from Ukraine among foreign issuers listed on the WSE is a result of a long-term and consistent strategy aiming to interest Ukrainian issuers and investors in the Polish capital market. Since the first debut in 2006, 12 Ukrainian companies picked WSE as a market of choice to list their shares. It proves that we not only created suitable conditions for raising growth capital, but we offer them the reputation of a mature and dynamic market, exposure to diversified and stable investor base and at a lower cost than other European exchanges. Most of WSE-listed Ukrainian companies operate in sectors in which Ukraine holds strong competitive advantages, such as food industry or energy which broaden investment opportunities for investors present in Polish capital market. There are areas which need further improvement. A few companies did not manage actively enough the communication with investors. Therefore, WSE supports and initiates activities aiming at ensuring that foreign companies set a very high standard of investor relations and disclosure obligations. Question: As for the further policy of the WSE towards companies from Ukraine, will it be a continuation of the previous one, or do you have your own view how it should be, and plan changes in the nearest future? If so, could you state the probable changes? Answer: We continue our efforts to attract issuers from Ukraine and Central and Eastern Europe. We aim at strengthening our position as a regional financial hub by attracting foreign companies from the Central and Eastern Europe. We believe that Warsaw has been and will the best choice for Ukrainian companies to enter the EU capital markets and we will do our best to support such decisions. Our mutual cooperation has already measurable benefits and we plan to maintain our interest in attracting Ukrainian issuers. Question: In Ukraine's business circles it is said that the Ukrainian Stock Exchange is effectively the Warsaw Stock Exchange. What's the WSE's view itself - is its strategy to compete with the Ukrainian stock markets, or to deal with them and develop a partnership? Answer: Our strategic goal is to expand the international position of the stock exchange from regional leader to regional hub for trading of financial instruments. WSE has a set of competitive advantages over other stock exchanges in the CEE region which include, among others: a recognizable brand, new state-of-the art trading system – Universal Trading Platform which place us among most advanced and developed stock markets, quality and safety of transactions, adequate liquidity as well as stable diversified base of domestic and foreign investors. Question: At one point there was a wave of a great dislike for Ukrainian companies in Warsaw. The arguments were that they were unprepared for IPOs, which eventually resulted in communication problems, unrealistic promises etc. At the same time, according to investment experts' unofficial statements the reason for the lack of preparation of some companies partially caused by a rush of investors seeking instant profits, like happened after the IPOs of Astarta and Kernel. What is your opinion: are Ukrainian companies really so bad, or can Polish investors boldly make investments in them, provided they are thoroughly prepared for IPO? Answer: Any investment decision should be made based on a thorough and in-depth analysis of a company profile, financial standing and development potential published in prospectus or other documents required by law in IPO process. There are Ukrainian companies that communicate well with investors and a few that require some improvements in this area. I would like to emphasize that these are isolated cases. I think that investors learn to distinguish them and not to put companies from one country into the same basket. However, investors do perceive country risk profiles differently and valuation of companies is dependent on that. WSE organises conferences and events which promote foreign companies and provide them with better exposure to institutional investors. The upcoming IPO Summit, Warsaw 2013 conference in early June which will host several hundred foreign investors interested in the region and managers of companies listed and thinking about listing at the WSE may serve as an example of such a forum for international issuers and investors wishing to discuss the future of global capital markets. Question: The companies of which sectors are the most interesting to investors at the present time? What indicators are they paying attention to - leadership in an industry, some type of activity, or the companies' quality? Answer: Currently, investors are interested in the most liquid companies and their activity is mainly focused on the largest companies in the Warsaw Stock Exchange which are included in the WIG20 index. We can name a few general factors by which investors asses a company’s attractiveness. These are country’s macroeconomic perspective, company’s sector potential and company’s profile. Despite unfavorable market condition properly managed companies with established position in the market or offering innovative products and services can always find growth capital on the Polish capital market. It is rather a question of attractive and solid equity story than timing itself. Question: Recently the Moscow Stock Exchange (MSE) announced its intention to compete with the Warsaw Stock Exchange for Ukrainian issuers. What are Warsaw's main advantages over Moscow? Can you name Moscow's strengths, but give arguments why obtaining a listing on the WSE would be better than getting one at the MSE? Answer: I wouldn’t like to comment on other exchanges, but I can say that our activity in mainly focused on Central and Eastern Europe and we place ourselves among other stock exchange from the region. Last year, WSE strengthened its leading position in the region as a market of choice for company in the region to list their shares. In 2012, WSE generated 54.2% of trading in equities in the region, accounted for 47.2% of the capitalization of shares and contributed 77.4% of trading in single-stock and index futures and options. The WSE was one of Europe’s most active IPO markets for another consecutive year. Warsaw Stock Exchange is in the top three, along with exchanges active on the most advanced European capital markets, in terms of IPO activity in Q1 2013. According to the recent PwC study ‘IPO Watch Europe’, WSE is ranked #2 in Europe by the number of IPOs and #3 by the value of IPOs in Q1 2013. Our strategic goal is to expand the international position of the stock exchange. With liquidity improvement, further development of the network of domestic and foreign exchange members and expansion of issuers and investors base we can achieve this goal. Question: In support of the MSE's intentions, I can note that it has been the first to express interest in Ukrainian bond issuers, and a debut issue is being prepared now that could be placed this year. I also know that some of Ukrainian companies that are listed on the WSE expressed interest in placing their bonds at Warsaw but later changed their mind. In connection with this, have you any plans to intensify the activity of the Catalyst bond market? Answer: Last year showed that Catalyst, our bond market, has a strong potential to grow. In 2012, the number of issuers grew to 155 and the value of issues increased by 30.7% to a record-high PLN 52.3 billion (over $16 billion). The average turnover per session more than doubled and reached PLN 4.5 million (near $1.4 million). Bond issue has become an effective financing tool for domestic companies looking for capital. In addition, foreign companies with established presence on the Polish capital market and solid reputation among investors, decided to choose this financing opportunity and completed bond issues. I would like to see Ukrainian issuers come to this market, however it is always a business decision, based on potential demand from investors and deal conditions that can be achieved.