You're reading: Warsaw Stock Exchange aims to boost burgeoning business with Ukraine

The number of Ukrainian listings on the Warsaw Stock Exchange may soon be boosted by a recent agreement with local business representatives.

With 11 Ukrainian companies listed on the Polish trading platform, enough to warrant a special WIG-Ukraine index, Warsaw is already a major destination for Ukrainian companies seeking to take their business to the next level.

Its significance may be further increased by an agreement signed on Feb. 23, which foresees the creation of a Club of Ukrainian Issuers and the launch of regional investment conferences explaining the ins and outs of a Warsaw-based listing.

Sugar producer Astarta carried out its initial public offering on the WSE in August 2006, breaking ground in the platform’s cooperation with Ukrainian companies. It has since been joined by a further 10 companies, mostly from the agricultural sector.

Individual names have crashed and soared, with prices rising 10-fold over a year only to plunge back down, but interest in a Warsaw-based listing remains strong and may grow stronger still.

An agreement for cooperation signed on Feb. 23 by the Polish Deputy Foreign Minister Beata Stelmach, the Polish-Ukrainian Chamber of Commerce and the President of the Warsaw Stock Exchange Ludwik Sobolewski, among others, has proposed to create a Ukrainian Issuers Club and launch a series of investment conferences in Ukraine’s regional centers.

The club would bring together both currently listed and prospective companies to share experiences, best practices, and help clarify the procedure of issuing shares on the Polish platform. Meanwhile, the investment conferences would help spread this knowledge throughout the regions.

Oleh Dubish, vice president of the Polish-Ukrainian Chamber of Commerce, said these measures were a great chance to “boost the [WSE] Ukrainian index.” Starting from next month, conferences would take place in such regional centers as Vinnytsia, Luhansk, Mykolaiv and Odessa, where knowledge of the financing opportunities available is limited, but where many eligible small- to medium-sized companies could nevertheless be found.

“Not everybody realizes that this is a realistic option” to raise funds at a competitive rate, he said.

While the biggest players still opt for London-based listings, Warsaw, with its reliable access to capital and solid reputation, is favored by mid-cap and smaller firms. The stock exchange put in a stellar performance in 2011, taking first place in Europe with almost half of all initial public offerings.

Though the value of Warsaw’s 2011 listings were dwarfed by London’s, which accounted for more than half of the European market, it still ranked it ahead of Deutsche Borse and Borsa Italiana.

The Warsaw Stock Exchange’s alternative market New Connect, designed for listings of up to $1 million, is particularly interesting for smaller yet potentially fast growing companies.

Andriy Dubetsky, head of the WSE’s representative office in Kyiv, said the exchange was providing support to such companies so that they can meet investment standards. Despite the current difficulties on capital markets he expects several new listings in the near future.

Ideas of double listings have also been floated. Dubetsky said that “this would not be a problem,” and would simply require a green light from the National Bank of Ukraine. This, however, was not the main issue, he said, as investors would find little added value in such a solution.

Instead, he suggested, the dual problems of supply and demand should be addressed. On the capital side, reforming the pension and insurance systems would be necessary to create the institutional buyers that make up the backbone of a stock exchange.

On the company side, improving the business climate and rule of law are necessary to protect investments and make companies appealing.

This, Dubetsky said, would allow the local exchange to become a stepping stone for international listings, and could revive the currently stagnant market.

Recent months have not been easy for Polish-Ukrainian economic relations, with companies suffering from the gradual erosion of rule of law in Ukraine. Yet Poland seems determined to power through the rough patch.

Stelmach’s visit produced a flurry of promises to solve current problems from the freshly minted Deputy Prime Minister Valeriy Khoroshkovsky. More importantly, a breakthrough was reached in talks over the use of government-backed credits to Ukrainian companies importing Polish goods.

A pilot program involving state-owned Ukreximbank will now allow importers to access cheap loans to pay for supplies.

Kyiv Post staff writer Jakub Parusinski can be reached at [email protected].