The Prague Stock Exchange has emerged as the best-performing market (after Israel) among fully developed countries over the past year, with gains far outpacing larger international financial centres.
The main Prague index, PX, rose nearly 45 percent in the last 12 months. When dividends are included, total returns reached almost 53 percent, according to the PX-TR index. By comparison, U.S. markets delivered barely a quarter of that growth.
Globally, only a few smaller or so-called exotic markets outperformed Prague. Zambia, Ghana, and Kyrgyzstan offered higher returns, though specific figures were not disclosed. Among developed economies, only Israel posted higher returns than Prague.
🏦 Demystifying terms
Specific shares, election spur growth
Energy and banking shares were the main drivers of the surge. The state-controlled utility ČEZ alone rose about 45 percent year-on-year. In late August, its trading volume hit a record, with almost CZK 4 billion changing hands in a single day.
“Interest in ČEZ shares in terms of volume is probably growing due to the upcoming elections in the Czech Republic,” Radim Kramule, portfolio manager at banking firm Erste Asset Management, told Czech media outlet E15.cz. “Representatives of the largest opposition party have repeatedly spoken about a plan for the state to own 100 percent of ČEZ shares,” he added.
Banks also posted large gains. Erste shares rose 65 percent in the last year, followed by Moneta with over 40 percent growth, and Komerční banka with nearly 37 percent. Analysts link the rise to higher profitability, cheap deposits from savers, and a recovery in mortgage lending.
“Bank profitability…is accompanied by a continued minimal share of non-performing loans and almost non-existent competition between banks regarding mortgages,” Radim Dohnal, analyst at financial services firm Capitalinked, told E15.
World markets also make a difference
Another factor strengthening Prague’s relative performance is the currency market. The U.S. dollar weakened nearly 6 percent against the Czech crown over the past year, reducing the returns Czech investors would have earned from U.S. stocks.
Even after the recent rally, experts note that Czech shares remain attractive compared with global peers. “From a multi-year investment stock perspective, the Prague Stock Exchange still has a lot to offer, even after the current growth. It is still one of the cheapest exchanges in the world with a high dividend yield of around 5 percent,” said Martin Pavlík, portfolio manager at Conseq Investment Management.
The PX index has more than doubled in three years, gaining 112 percent. While analysts caution against expecting similar growth to continue, Prague has secured its place among the most profitable markets in the developed world.