The Czech Republic is one of the most remarkable economic successes of the last three decades. However, its stock market is not on the radar of most international investors. In this post, we analyze the most important stock market indexes of the Czech Republic.
The Czech Republic, located in Central Europe, is a fascinating country both historically and economically. With a population of almost 11 million people, the Czech economy has an attractive stock market with very low valuations.
One of the key aspects to consider when investing in the Czech Republic is its strong economy. According to Eurostat data, the Czech GDP per capita is only 8% lower than the EU average. To put it in perspective, France´s is 4% higher, Italy´s 5% lower and Spain’s 17% lower.
This means that the Czech Republic is already richer than Spain and almost as rich as Italy. And its growth trend is much more positive. In addition to that, the Czech economy has shown remarkable resilience during periods of economic uncertainty, such as the global recession of 2008.
We should highlight the fact that the Czech Republic had a communist economic and social system until the early 1990s. For more details on the Czech economic miracle, check out the following analysis I did:
Economy of the Czech Republic – 5 Lessons to Learn
The Czech stock market operates on the Prague Stock Exchange, which has been active since 1993. It is one of the oldest stock exchanges in Europe, having opened its doors in the mid-nineteenth century. However, it remained closed for a period of about 50 years during which the communist regime ruled the country.
The Prague Stock Exchange is owned and operated by Wiener Börse, the company in charge of the Vienna Stock Exchange. Within this same group we find the main stock exchanges of other Central European countries such as Hungary and Croatia.
Investing in the Czech stock exchange offers international investors the opportunity to diversify their portfolios and gain exposure to a growing economy. The country has a favorable business environment, an attractive tax regime, developed infrastructure and a highly skilled workforce.
For those interested in investing in the Czech Republic without having to select individual companies, we analyze the two most important stock indexes in the country. This will allow you to find a suitable ETF.
The main benchmark index of the Prague Stock Exchange is the PX Index, also known simply as PX. It is composed of the companies with the highest market capitalization or transaction volume in the country.
The Prague Stock Exchange is responsible for calculating, publishing and licensing this index.
The number of stocks within the PX is not constant, but fluctuates over time depending on how many companies meet the eligibility criteria. In general, the PX tends to have about 15 stocks in it.
Within the index, companies are weighted based on their market capitalization adjusted for free float. And none of them can represent more than 20% of the value of the index at the time the index is rebalanced. The PX is rebalanced and updated four time a year.
Among the largest companies in the PX Index are Komerční Banka, a financial institution, and VIG, an insurance company that also operates in other countries such as Austria.
If you are interested in additional information about how the PX is constructed, you can take a look at its official website.
MSCI Czech Republic
The other option for those interested in investing passively in the Czech Republic is to find an ETF that tracks the MSCI Czech Republic, the other of the major stock market indices.
This index is calculated by the US company MSCI. It features all Czech companies that are part of the global MSCI Emerging Markets Index. For this reason, the number of stocks within the MSCI Czech Republic varies over time.
It is worth highlighting that this is a highly concentrated index, for two reasons. On the one hand, the number of stocks included in the MSCI Czech Republic is usually very low. Often, there are only 3 companies in it.
On the other hand, there is no cap to the weight a stock can have in the index. For this reason, ČEZ Group, a business conglomerate that operates the country’s energy grid as well as its coal mines, heavily dominates the performance of the entire index.
For more information about the MSCI Czech Republic, you can visit MSCI´s website.
I hope you found this article about stock market indexes in the Czech Republic useful. If you also want to learn about the stock indexes of the neighboring country, please visit the following link:
Top 4 Stock Market Indices in Poland
Lastly, I also encourage you to subscribe to my newsletter: