Poland is one of the largest and most promising economies in Eastern Europe. We analyze the most important stock market indices for Poland.
With almost 40 million people, Poland is one of the largest countries in Eastern Europe. In fact, of the countries that were part of the communist bloc before the fall of the Berlin Wall, the Polish economy is the second largest, only behind that of Russia.
Poland has enjoyed three decades of virtually uninterrupted economic growth. Its standard of living is already very similar to Southern European countries.
But there are two important differences between the most prosperous economies in Eastern Europe and those in the south of the continent: trend and fundamentals.
As for their trend, Poland and most of the ex-communist countries have been enjoying high growth rates for decades. They are places where the population feels that little by little their standard of living has been improving. And that creates optimism for the future.
On the contrary, most Southern European countries have seen their economies stagnate, and social problems have increased. And trends are a very difficult thing to change.
Related to the previous point are the fundamental data. While Poland and similar countries tend to enjoy relatively sound public finances and legislation that is conducive to economic development, countries in southern and western Europe tend to have very high debt levels and economic models that are unfavorable to innovation and economic growth.
For all these reasons, Poland can be very promising when it comes to investing.
Whether you want to find a suitable ETF to invest passively in the country, or simply want to analyze the historical performance of its market, being familiar with the most important stock market indices in Poland will be very useful.
The WIG is the most inclusive stock market index of the Warsaw Stock Exchange, since it is composed of all the companies listed on the country’s major stock exchanges. It is composed of more than 300 stocks.
The WIG was introduced in 1991, on the same day that the Warsaw Stock Exchange reopened after the fall of communism in the country. WIG is the acronym for Warszawski Indeks Giełdowy, which in Polish stands for “Polish Stock Index”. It is owned and calculated by the Warsaw Stock Exchange.
Because there are some very small companies in the WIG, it is a difficult index to replicate by ETF providers, so it will mostly be useful as a tool to analyze the historical performance of the Polish stock market.
For additional information about the WIG, here is the link to the official website of the Warsaw Stock Exchange.
Also introduced in 1991,the WIG20 is the Polish stock market index that receives the most attention from the financial press.
Also published by the Warsaw Stock Exchange, the WIG20 is made up of the 20 companies with the largest market capitalization in the country, as long as the number of stocks in any one sector is not above the maximum specified by the index methodology.
This index methodology stipulates that no economic sector, such as financials, can have more than 5 companies within the index.
Because the WIG20 includes mostly large, liquid companies, it is often a favorite for ETF providers to replicate.
Introduced in 2013, the WIG30 is an alternative stock index published by the Warsaw Stock Exchange. It is very similar to its sibling, the WIG20.
The WIG30 is composed of the 30 largest listed companies in Poland, as long as no economic sector is represented by more than 7 companies. In this sense, its construction criteria are quite similar to those of the WIG20.
However, the way in which the index value is calculated is significantly different. While most stock indices weight their companies according to their market capitalization, adjusted or not for the free float, the WIG30 weights them based on their stock prices.
That is, the total size of a company is irrelevant when it comes to calculating its weight within the index. Only the share price matters. The higher the share price, the higher the weight. In this sense, the WIG30 resembles the US stock market index Dow Jones Industrial Average.
Keep in mind that, when analyzing historical performance numbers, a stock index that weights its companies based on their share prices is unreliable if we want to draw conclusions, so the WIG or the WIG20 are better indicators.
Finally, the MSCI Poland is a stock market index published by the US company MSCI. It contains all Polish companies that are part of the global MSCI Emerging Markets index.
Because the inclusion criteria are set by the global index, the number of companies that can be found in the MSCI Poland fluctuates over time.
Despite these fluctuations, the number of shares in the MSCI Poland is usually around 15. Consequently, it is highly correlated with the WIG20. When it comes to sectors, it is financials that dominate the MSCI Poland.
You will find additional information on the link to the MSCI website.
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