PolskiMacroeconomic Conditions in 2016
According to the Central Statistical Office (GUS), Poland’s gross domestic product (GDP) grew by 2.8 percent in 2016 and 3.9 percent in 2015. According to GUS, domestic demand grew by 2.8 percent while investments shrank by 5.5 percent in 2016.
Productivity in the industry grew by 1.0 percent year on year in 2016 while employment grew by 2.2 percent and the average monthly gross wage grew by 3.2 percent.
Consumer price deflation continued in Poland in 2016 as a result of external factors, including mainly falling commodity prices on the global markets, and in the absence of demand pressures in Poland. According to GUS, deflation was 0.6 percent in 2016. According to GUS, the consumer price index in 2016 was mainly driven by lower prices of transport (down by 4.6 percent), clothing and footwear (down by 4.4 percent), which reduced CPI in the period by 0.40 percentage points and 0.24 percentage points, respectively. Higher food prices (up by 1 percent) raised CPI by 0.21 percentage points.
NBP maintained the interest rates unchanged throughout 2016 and made it known that the monetary policy was unlikely to change at least until the end of 2017. As a result, WIBOR3M and WIBOR6M remained stable throughout 2016 within a very narrow band of 1.67%-1.73% and 1.74%-1.81%, respectively (moving closer to the ceiling of the band later in the year). Although the rates were kept unchanged, market expectations of the monetary policy throughout the year varied considerably from an interest rate cut by 25 bps in 2017 to a 25 bps hike in late 2017.
In Europe, the ECB’s continued asset purchase programme resulted in a steady decrease of rates on EUR interbank deposits. Consequently, the rates approached the central bank’s deposit rate (-0.4%) in the longer tenors. The US followed the opposite trend as the short end of the yield curve was driven up by rate hike expectations. As a result, USD deposit rates rose considerably.
The exchange rate of PLN against the main currencies remained relatively stable under those conditions. Treasury yields were also relatively stable from mid-2015 onwards.
Announcements of Further Reform of the Open-ended Pension Fund System
In July 2016, the Government published a proposal of a further reform of the pension system involving the nationalisation of a part of savings in open-ended pension funds and a transfer of 25% of liquid assets (cash, foreign stocks, bonds) to a Demographic Reserve Fund. The remaining 75% of the assets (Polish stocks) would remain in open-ended pension funds, which would eventually be transformed into investment funds. The changes are expected to take effect in early 2018 and the details will be disclosed in early 2017.
Although the details of the reform have not yet been defined, the very announcement of such reform was welcomed by participants of the Polish capital market and foreign investors. First, the announcement of the reform partly eliminated investors’ uncertainty about the future of open-ended pension funds and assets, which in early 2016 largely affected their activity on GPW’s equity market and resulted in lower turnover. Second, the announcement of transformation of open-ended pension funds into investment funds may release some of the free float on GPW and improve the liquidity of securities locked in open-ended pension fund portfolios. For many years, open-ended pension funds have been rather passive investors on GPW, and their share in the turnover in equities was ca. 5-6 percent. Meanwhile, investment funds are much more active investors and compete with their peers, which opens prospects of better liquidity on GPW’s stock market.
In 2016, the value of Polish shares in open-ended pension fund portfolios increased by 9.4% to PLN 116.2 billion (Source: KNF).
Change of the Model of Financing of Supervision of the Polish Capital Market
Starting in 2016, a new model of financing of supervision of the Polish capital market is in place, where the cost of supervision by the Polish Financial Supervision Authority is paid not only by GPW and KDPW as before but by a broader group of entities (including issuers, investment firms, banks, insurers, investment fund managers). As a result, the cost paid by the GPW Group was reduced in 2016 by approximately one half compared to 2015. In response, GPW decided to reduce its transaction fees:
- As of 1 January 2016, GPW reduced the transaction fees on trade in shares, rights to shares and ETF units for all orders in the part charged on the value of an order up to
- PLN 100 thousand from 0.033% to 0.029%. It is a promotion without a fixed deadline offered on the Main Market and NewConnect. GPW decided to reduce the trading fees as a result of changes in the system of financing supervision of the capital market.
- As of 1 November 2016, GPW reduced fees for Exchange Members on transactions in shares as well as market data from the GPW Main Market and the Alternative Trading System NewConnect. The fixed fee on an order was reduced from PLN 0.20 to PLN 0.15. The reduction is a promotion without a fixed deadline applicable to all broker’s orders executed on the order book and in block trades in shares, rights to shares and ETFs. The reduction mainly applies to small orders placed by retail investors and via DMA.