January 31, 2019 / 3:21 PM / 24 days ago

Warsaw bourse seeks to expand share lending to boost turnover

WARSAW, Jan 31 (Reuters) - The Warsaw Stock Exchange , which has struggled with falling turnover, wants approval for pension funds to lend shares to other market participants as this could boost turnover growth, the exchange’s CEO told Reuters.

In 2018, equities turnover by value on the WSE dropped by almost 19 percent to 212 billion zlotys ($54.79 billion). The market’s main index lost more than 7 percent, partly because frequent management changes at state-controlled listed companies deterred investors.

CEO Marek Dietl said it would be useful if institutions like pension funds, state the Demographic Reserve Fund and others started lending shares.

“We estimate very conservatively that, as a result, turnover would grow by 3-5 percent,” Dietl told Reuters in an interview. “In some countries, which made it possible to borrow shares, there was even a 10 percent turnover increase,” he said.

Borrowing shares is possible on the Warsaw exchange for investors interested in short selling transactions, but pension funds are outside the scheme.

Dietl said he believed it would be technically possible to start the scheme this year, although some regulatory changes would be needed to allow pension funds to lend shares to other market participants.

A government spokeswoman as well as the Finance Ministry press office were not immediately available to comment.

Dietl wants the share borrowing scheme to include Poland’s new Employees Pension Scheme, known as PPK, which will be introduced in July 2019. This is set to bring 12-15 billion zloty a year to the capital market, potentially increasing turnover on the exchange.

Once the Employees Pension Scheme is up and running this will mean some of its cash will be invested in shares on the Warsaw exchange.

Dietl said this could mean more companies will be interested in going public, as additional capital coming into the market could boost demand for shares as well as valuations.

Last year, only seven companies debuted on the Warsaw bourse selling shares worth around 300 million zlotys, the lowest total in many years.

Dietl confirmed that the Warsaw bourse wanted to continue spending at least 60 percent of consolidated net profit on dividends. ($1 = 3.7236 zlotys) (Reporting by Anna Koper; Editing by Jane Merriman)

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