Why Prague’s stock exchange is so lame

Interesting article in the FT that pretends to be about how the Viennese owners of the Prague stock are planning, someday, to try to make it less of a loser compared with Warsaw’s booming bourse. The reality is that Warsaw is CEE’s financial center, of course. But the article’s a must-read because of the background info about how Czech politicians and regulators botched their chance to provide a local alternative for raising capital (as opposed to just borrowing from banks).

A capital markets culture – in many ways alien to central European traditions of capitalism, which share many characteristics with the German bank-financed model – did not take root in the Czech Republic.

The Prague bourse now has 27 listings, some of them very thinly traded, a market capitalisation of €57bn ($81bn) and average monthly turnover of €1.3bn.

IPOs are a rarity, with only two new listings in 2010: Kit Digital, a technology company and Fortuna, a gaming business.

By contrast, in Warsaw, where the market grew more slowly and was much more closely regulated, the idea of raising funds through the stock exchange is much more popular among local businesses.

Warsaw has also been buttressed by the Polish government’s continuing privatisation programme, which has seen billions of zlotys a year in new issues coming on to the bourse.

“Unfortunately, I don’t have a government with lots of companies to sell,” says a rueful Mr Koblic.

As Warsaw has grown, it has attracted some Czech companies, including CEZ, the utility, and NWR, the coal miner, which are traded both in Prague and Warsaw.

The investment community is also shifting to the Polish capital.

“We have our IT and back office in Prague, but if you look at product volume, Warsaw has clearly become the financial hub of central Europe,” says Jan Sykora, one of the owners of Wood & Co, a central European brokerage and investment bank.


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