• Thu. Apr 18th, 2024

Fund Manager Turned Finance Minister Wants to Revive Poland’s Stock Market

(Bloomberg) — Poland’s new finance minister is aiming to give its faltering stock market a boost by spurring investment in energy transition and encouraging state-owned companies to pay more in dividends.  

Andrzej Domanski, a former equity portfolio manager, bemoaned the fate of minority investors, who — he said — got sidelined by the previous nationalist administration as it sought to tighten its grip over state-controlled companies. The Warsaw bourse, the biggest in central and eastern Europe, has seen more firms leave the market than debut on it since 2017.

“There have been few initial public offerings and many companies delisted as there was no belief that it was profitable to be on the capital market,” Domanski told Bloomberg in an interview. “I hope this will now change.”

The perilous state of the domestic market strikes a nerve with Domanski, 42, who used to manage stocks for the Polish unit of Belgium’s KBC Group NV and local outfits including Noble Funds TFI before going into politics in 2019.

A fresh face in Donald Tusk’s two-month-old cabinet, Domanski co-wrote the ruling Civic Platform party’s economic agenda. He won a seat in parliament in October’s elections and became finance minister two months later. 

Domanski wants investors to funnel more money into companies that will help Poland wean itself off dirty coal and embrace renewable energy. The goal is to meet tough EU greenhouse emission goals. 

This can’t be done with public funds alone, even as the administration seeks to convince the European Union to release almost €60 billion ($64.9 billion) in post-pandemic financing. Brussels has blocked the aid due to concerns over democratic backsliding during eight years of the previous administration.

Read more: Polish Finance Minister Eyes Higher Bank Dividends, FX Bonds

Tusk’s administration has pledged to patch up ties with the EU and Domanski is seeking to do the same with business. Companies will applaud the restoration of the rule of law and a stop to political tinkering with tax codes and rules, he said. 

“Poland has made a U-turn from soft autocracy and is confidently moving to becoming a decision-making center of the European Union,” Domanski said. “Keeping an underweight stance in Polish assets is a risky strategy, in my humble opinion.”

So far, investors appear to be on board. Since the election, Warsaw’s WIG20 stock index has jumped 23%, while the zloty appreciated by 7.1% to the dollar and 4.5% against the euro. Yields on local bonds have dropped even as monetary policy has turned more hawkish.

In his telling, Domanski has his work cut out for him. The former administration’s policies have hit the $688 billion economy, eroded the country’s creditworthiness and pulled down companies’ investment spending to “disgraceful” levels, the minister said. The country’s loan-to-deposit ratio has dropped to historic lows and is weakening further.

Domanski said the fiscal deficit will decline by half a percentage point this year to 5.1% of economic output, still a far cry from 2.6% in 2015 when the populists took over. Economic revival — not high inflation as was the case in past years — will help narrow the gap down the line, he said.

Asked about Poland’s potential move to join the euro, a move rejected by the populists, Domanski said there were “strong arguments, more of a geopolitical nature,” to have the euro. He quickly added that for now, there’s no discussion on the topic. 

“Our task, which we have been carrying out for two months, is to restore the foundations of a democratic state of law and institutional order,” Domanski said.

–With assistance from Konrad Krasuski and Stefani Reynolds.

©2024 Bloomberg L.P.

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