FTSE upgrade could cost WSE $340 mln – JP Morgan

According to JP Morgan, the recent upgrade of the Warsaw Stock Exchange to a developed from the advanced emerging category by FTSE could cost the Warsaw bourse $340 million in net outflows. In the developed index, WSE will only reach 0.38 percent value of the whole index, while in the emerging one, it accounted for 1.6 percent. According to JP Morgan experts, the lower percentage will result in a sale of Polish equities by the largest funds. For example, the largest fund - the Vanguard FTSE Emerging Markets ETF - will sell Polish shares worth about $1 billion. JP Morgan analysts also point out that some of the Polish companies that are now considered large caps in the Emerging Market Index will become small caps in the developed countries index next year. And this has tangible consequences. Large companies in smaller indexes can count on more reports, analyzes, which means higher interest from investors. Being a small company in a large collection may, in turn, reduce this interest. “We believe that most clients and most of the sell-side will not change coverage models on the back of the FTSE switch, so we anticipate little impact now,” JP Morgan said, warning that if another prominent index MSCI upgrades Poland, that would spell more trouble. “Should MSCI upgrade Poland as well, the market would struggle for sell-side coverage and detailed buy-side focus as well,” the report concluded, adding that such upgrade is “unlikely anytime soon.”