New blog post: Polish Employee Pension Plans (PPK) could significantly boost the WSE in the coming years

02/05/2023

According to latest data published last week, the assets of PPKs already reached PLN 14.9bn/EUR 3.2bn. The pension plans, which were only introduced in 2019 and are co-financed by employees, employers and the Polish government, are quickly adding participants, with 3.3m (43.7% participation rate) of employees already in the program. Only in the last two months, the number of new participants has grown by 718k due to an automatic subscription, which is conducted every 4 years of 18-55 year old employees, who previously decided to not participate in the PPKs.

Currently, PPKs, which are managed by private investment management firms, are adding PLN 500m/EUR 98m of assets per month, of which up to 70% – dependent on the age of the employee – can be invested in stocks (in case of <40 years olds, the share can equal max. 70% and for the age group 60+ max. 15%).  Thereof, at least 40% of assets must be invested in Polish blue chips (WIG20 index). PPKs are also allowed to invest max. 20% of their assets dedicated to equities in Polish midcaps, max. 10% in smallcaps (incl. from the alternative Newconnect segment) and min. 20% on foreign stocks exchanges.

Latest forecasts foresee an increase of the share of PPK participants to 50% within the next 2 years. Monthly new assets should grow accordingly. This should positively impact the daily trading turnover on the Warsaw Stock Exchange and thus make the Polish capital market more attractive for foreign institutional investors.

In December 2022, the Polish capital market had a record low CAPE (= inflation-adjusted 10y average P/E ratio) of only 7.1x vs. 16.7x for Deutsche Börse and 28.4x for the NYSE. While Poland’s economy has been growing rapidly in the last years with yearly GDP growth rates of 3-6%, the stock market – and the bluechip WIG20 index in particular – have not kept pace. The WSE is the largest stock exchange in the CEE region with 754 listed companies. The No 2 – the stock exchange in Sofia – has 255 companies.