Poland: the ignored stockmarket superstar

Europe’s bourses have not shone so brightly in years. Speak to those who analyse them for a living and you will still detect a note of disbelief—they can hardly remember the last time foreign investors were paying them as much attention. Why that should be is no mystery. Measured in dollars, Europe’s Stoxx 600 index has risen by 16% in 2025, compared with 3% for the MSCI World.

More mysterious, Europe’s highest-soaring stockmarket has slipped beneath many investors’ radars. Everyone knows that share prices in Germany have rocketed, and that those of its armsmakers have gone ballistic. Yet its DAX index is up by a paltry 27% (in dollars again) this year. Poland’s WIG has risen by over 40% and, since a trough in 2022, has nearly tripled. Quietly, a long-moribund market has become Europe’s superstar.

“Poland is the new Germany,” says Peter Bosek, chief executive of Erste Group Bank, an Austrian lender that is acquiring Santander Bank Polska, Poland’s third-largest. The analogy works in several ways. Since the fall of the Soviet Union, but especially over the past two decades, Poland has achieved a stunning economic transformation—reminiscent of Germany’s in the second half of the 20th century. By the World Bank’s standards, it dodged the “middle-income trap” that ensnared economies elsewhere, moving to high-income status in just 15 years. The IMF reckons that, this year, Poland’s GDP per person will exceed Japan’s, adjusted for purchasing power. In 2005 Poland’s income on this measure was 50% of the EU average; in 2025 the IMF thinks it will rise to 85%.

Until recently, though, Poland’s success did little to boost the appeal of its stockmarket to international investors. Between 2010 and 2020, share prices were more or less flat in dollar terms. During the covid-19 pandemic and the crash of 2022, they convulsed along with markets elsewhere. Then, in 2023, Poles started looking more German in a second way: by booting their populist, interventionist and anti-EU Law and Justice (PiS) party out of power.

In its place they elected an investor-friendly alliance led by Donald Tusk, a former president of the European Council. PiS’s approach to markets had included installing a crony to run Poland’s central bank, which then slashed interest rates during the 2023 election campaign, despite inflation being at 10%. Meanwhile Orlen, a state-run and PiS-controlled energy firm, conveniently cut fuel prices. Mr Tusk’s comparatively hands-off administration has made Poland far more investible. And it has so far unlocked €21bn ($23bn) in post-covid aid from the EU, which had previously been withheld owing to PiS’s meddling with the courts.

That left Polish shares poised to participate—and then some—in Europe’s rally this year, as investors have reconsidered their outsize allocations to America and wondered where else they can park their cash. How about the stockmarket of a mid-sized, rich country that is boosting its growth prospects with a big fiscal stimulus and a determination to re-arm?

The reasoning that has led many to Germany applies to Poland, too. In 2025 it expects to spend 4.7% of its GDP on defence, more than any other NATO member and up from 2.2% in 2022. So far, much of that has gone on imports to replace the hardware Poland sent to Ukraine after Russia’s invasion, and so has done little to raise GDP. But that will soon change, since Poland is also acquiring manufacturing and maintenance capacity. The government says it will spend 50% of its funds for technological modernisation on equipment made in Poland. Faster growth should follow.

More immediately, points out Mai Doan of Bank of America, Poland should benefit from German growth, which is set to speed up as Germany spends more on defence and infrastructure. She estimates that higher German growth passes through almost one-for-one across the border, since it translates into higher demand for Polish exports, including capital goods and military gear.

There are limits to how fast money can flow into Polish stocks with the WIG index’s market value at just $520bn. Nevertheless, 40% of that is made up of the shares of financial firms which are well-placed to harvest returns from a strong economy. The market remains enticingly cheap. Share prices are only ten times firms’ expected earnings for this year, compared with 15 for Europe more broadly and 22 for America. For now, the rise of the Warsaw Stock Exchange has attracted little attention. Do not bet on that continuing. ■