Polish companies face an urgent need to improve communication with international investors after last year’s pension reform cut off a traditional source of funds for the country’s capital market. under the previous system, all Poles were required to choose a privately run pension fund, to which they made mandatory contributions from each monthly pay packet. The funds kept about one third of their assets in Warsaw-listed stocks, accounting for approximately 17 percent of the market’s total capitalization.
The flood of monthly contributions slowed to a trickle after last year, when accounts were automatically transferred back to the government-run system unless people opted to stay with the private funds – a choice made by only 15 percent. The government also abolished restrictions on the private funds’ investments in foreign stocks. That means Polish firms have lost the captive audience of funds that provided liquidity over the past decade.
In fact, the pension funds’ influence had grown so strong that regional companies including Czech power producer CEZ and hungarian oil group MOl flocked to the Warsaw Stock Exchange, setting up dual listings to take advantage of the extra liquidity provided by this unique group of domestic institutional investors.
The new rules have soured sentiment on the Polish market: the number of IPOs has fallen drastically, while leading market indexes have lagged behind global benchmarks. Meanwhile, the share of foreign investors in Warsaw has risen by two percentage points to 49 percent, and is set to grow further. That’s forcing Polish companies to compete for the attention of investors in london and New York, rather than just locally.
During 2013-2014, NBS Communications ran several perception studies among international analysts and fund managers who cover top Polish companies from a range of industries, to find out how market professionals outside Poland assess particular companies’ IR efforts. We found several broad trends that could spell trouble for Polish listed companies if they’re not corrected – and which present an opportunity for PR and IR professionals.
Firstly, foreign investors say they haven’t been given the chance to develop individual relationships with board members or IROs at Polish companies. Survey participants say Polish issuers don’t hold enough roadshows in world financial centers, and call on each firm to designate a single person as a contact point for foreign analysts and fund managers. While most large Polish companies already hold regular conference calls in English, that can’t take the place of direct contact.
Secondly, foreign investors say they look at Polish stocks in the context of their global sector: they expect managers to present their companies in relation to global peers and communicate their market positions clearly, making an effort to stand out from the hundreds of similar companies around the world that investors hear from every day. Finally, every firm is unique, with its own identity and plans for development. The purpose of IR is to present these attributes, building a coherent and attractive message: an equity story. Fund managers sift through piles of information in search of pearls: they need a substantive, understandable message that will allow them to zoom in on a particular company.
In fact, these elements are the basic building blocks of IR anywhere in the world. The cozy days when Polish firms could rely on the country’s pension funds to buy their shares are gone – and they’re not coming back. Polish shares are increasingly judged against their global peers, and companies need to raise their IR game to compete for the attention of global investors.
Anna Krajewska is CEO of consultancy NBS Communications
