Biotech Micro Caps Fighting Covid-19 Emerge as Stars in Warsaw

(Bloomberg) -- A band of small-cap stocks in companies developing responses to the coronavirus pandemic are turning out to be money spinners for the Warsaw Stock Exchange.

The operator of eastern Europe’s biggest bourse on Friday reported a 30% year-on-year increase in revenue from stock trading fees in the first quarter, fueled by transactions from retail brokerage accounts opened this year. Thanks to a surge in smaller orders for stocks, the average fee on each trade rose to 0.27%, the highest since at least 2017.

The jump in interest from Poland’s mom and pop investors has revived the NewConnect platform of the tiniest stocks: volumes have more than tripled this year and valuations on its NC Index have increased by almost 50%.

In contrast with the fortunes of Warsaw’s main stock indexes, the coronavirus outbreak has energized the highly speculative NewConnect market. Its four biggest gainers, which have each advanced more than six-fold in 2020, are companies with businesses refocused on virus-related areas: MedCamp SA has said it is working on a vaccine, MBF Group SA imports personal protection equipment, while Inno-Gene SA and Biomaxima SA are concentrating on quick virus tests.

The exchange operator is optimistic that the renewed interest in stocks among retail investors has staying power, partly because equities are a more attractive option than the low rates on bank savings accounts. While some of these biotechnology companies have no previous background in virology, they may be attracting buyers keen not to miss out on the sort of wave of spectacular growth in prices produced by the country’s now world-renowned computer game developers.

“This situation resembles the travels by Venetian merchants in the past as they went in search of spices, with many willing to invest in their endeavours, without any certainty of success,” Marek Dietl, the bourse’s chief executive officer, told reporters at a briefing Friday. “It’s even better when such investments are made in a public market, where you will find skeptics ensuring that valuations are kept at more realistic levels.”

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