Prague stock exchange on bearish run
Once seen a symbol of the comeback of capitalism, the Prague Stock Exchange has celebrated a somber two decades with share trading volume down in recent years and questions being asked about its long term role.
Total trading volume approached 175 billion crowns, or around half the level of 2012. Looked at through a longer perspective, the trading volume is down to less than a fifth of the level of its peak year of 2005. The 1,715 companies that once featured on the exchange during the heyday of the famous Czech coupon privatizations is now down to a few dozen. The Prague exchange itself is now part of a grouping including Vienna, Budapest and Ljubljana.
The only real bright spot for the Prague exchange last year was the ongoing expansion of its established electricity trading and the launch of gas trading activities.
The woes of the exchange have frequently been aired. Replacements have not been found for the big companies that regularly delist from the exchange, putting ever more reliance on the remaining heavyweights, ČEZ and Komerční banka, to keep trading ticking over at a reasonable rate. Those two companies, along with Erste Bank and Telefonica 02, are responsible for an estimated 90 percent of the total share trading volume.
Basically traders looking round for liquidity in the star Czech shares can find it increasingly elsewhere.
The Warsaw Stock Exchange has long since overshadowed Prague. Just a few facts from last year, such as the 18 percent increase in share trading turnover, 450 companies present on the main market and 23 new listings over the year, tell some of the story.
The two biggest local stock brokers on the Prague exchange make no bones about the fact that they use their Czech bases for trading at a regional level across Central and Eastern Europe.
Should anyone worry that the Czech exchange is not fulfilling its basic role of bringing together local companies with good ideas and expansion plans and investors with cash to spare? With interest rates near zero, access to cash should not be a problem and Czech firms have, apparently, been turning to their local, friendly, bank manager for financing. These, though, were the same banks that were being pilloried for putting a squeeze on new lending a few months ago.
Stock exchange bosses and brokerages pinpoint tepid government support as one of the reasons why Prague now has fallen so far behind Warsaw. Past opportunities to sell off slices of state companies on the local exchange have been shunned under governments of all colours. Bringing in strategic investors has consistently been favoured by ministers over the option to float a chunk of shares on the stock market.
At the other end of the market, the Czech government has already taken steps to create seed funds for investments in small and innovative companies. If these firms grow as envisaged, they could well find the Prague exchange exists in little more than a name when it comes to raising cash for companies.