Czech stock exchange - How to invest in Czech companies? [Guide]

The Czech Republic is one of the most developed economies in the region of Central and Eastern Europe. Deep integration with the countries of the "old" European Union (mainly Germany) and a stable fiscal and monetary policy resulted in very fast economic growth. In 2020, the Czech Republic was ahead of Spain and Portugal in terms of GDP per capita after purchasing power parity (PPP). The Czech koruna is also one of the strongest currencies in the region. For a long time, the Czech Central Bank had to pursue a loose monetary policy in order not to allow the exchange rate to rise too much. Due to the wealthy society, real estate prices in the most thriving economic centers of the country (mainly Prague) rose sharply. According to data compiled by Eurostat, between 2010 and 2021 housing prices in the Czech Republic increased by over 100%. It was the 6th highest result in the entire European Union. For comparison, in Poland prices increased by less than 50% during this time. But the dynamic development of the economy did not translate into an increase in the importance of the Prague Stock Exchange, which remained a small, regional stock exchange. This does not mean that you cannot make money in this market. There are many companies listed on the Prague market that stand a chance of increasing their value in the next few years. In today's article, we will show you how to invest in Czech companies. We invite you to read.

Czech Stock Exchange - basic information

The Prague Stock Exchange is the largest and oldest stock exchange in the Czech Republic. The majority of shares of the stock exchange belongs to the Vienna Stock Exchange (Wiener Borse AG). The Prague Stock Exchange (PSE) itself is part of the PX Group. Part of the PX Group is the Central Securities Depository, which plays a similar role to the Polish National Depository for Securities (KDPW) - i.e. it deals with the registration of transactions taking place on the stock exchange or intermediation in the payment of dividends from companies. In addition, PX Group closely cooperates with PXE (Power Exchange Central Europe), which is one of the largest electricity and natural gas trading sites in Central and Eastern Europe. 

Stock exchange history

In 2021, the Prague Stock Exchange celebrated its 150th anniversary. More than a century ago, it was one of the most important places to trade in securities in the Austro-Hungarian Monarchy. However, it should be remembered that the Vienna and Budapest stock exchanges were in the lead at that time. The Prague Stock Exchange was local in character, but during this period it experienced dynamic development. The first trading session took place on April 17, 1871 between 11:30 and 13:00 in the street “Na Příkopě”. Trading on the stock exchange was then very limited. At that time, they could not trade, among others women, criminals or people who have gone bankrupt in their history. The members of the stock exchange, who had the right to participate in trading "on the trading floor", enjoyed the highest respect. 

The renaissance of the stock exchange fell on the Czechoslovak Republic. It was then that the developing Czech companies needed a place where they would be able to obtain financing for development. Prague quickly became one of the most important financial centers in Central and Eastern Europe. The dynamic development of the Prague Stock Exchange was interrupted by the aggression of the Third Reich against Czechoslovakia. Trading on the stock exchange froze to be completely abolished in 1943. After the fall of Nazi Germany, enthusiasts began rebuilding the stock exchange structures. However, the growing importance of the communist party shattered all hope of development. The stock exchange has been closed for almost 50 years. Only in 1993, thanks to the help of the French government and employees of the Lyon Stock Exchange, trading began on the Prague Stock Exchange. It was then that the New Zealand brothers became interested in the Czech stock exchange, whose history you can see at this link.

How to invest in Czech companies

Investing in Czech companies is not as easy as it seems. It is a regional market which means that many brokers do not offer direct investment opportunities in this market. If you are interested in trading directly in this market, you should look for a brokerage house that allows you to invest cheaply in this market. Another option is to trade derivatives that give you exposure to this market (eg CFDs on a major index). Another option is to find an ETF that invests a significant portion of its assets in Czech companies. In summary, you can invest in Czech companies by means of:

• individual selection of companies,
• investing through ETFs,
• use of derivatives that give exposure to this market.

PX Index - basic information 

The most important benchmark for Czech companies is the PX index. Initially, the index was called PX-50 and consisted of 50 components. In 2006, the name was changed to PX. Index shares are calculated based on the capitalization of companies. Of course, the index shares are then adjusted for the free float ratio and company size. Thanks to this, the shares of the largest components do not dominate the index as much as it results from their capitalization.

CZKCASH chart (CFD on the PX index), interval W1. Source: xNUMX XTB.

As at June 20, 2022, 10 companies were components of the index:

• THROUGH
• Erste group
• Commercial Bank
• Money Bank coin
• VIG
• Philip Morris CR
• Colt Vol
• Kofola CS

From this point of view, the most important ones from the point of view of the share in the index are CEZ, Erste, Komerci Banka. As you can see, the index is dominated by energy and financial companies. The diversity of the index is much smaller than in the case of, for example, the neighboring Warsaw Stock Exchange and its most important index - WIG 20.

PX index components

In this part of the article we will present some selected components of the PX index. This is a particularly important excerpt from the article for people who want to gain exposure to the Czech stock market themselves. Due to the fact that the index exposure is dominated by companies from the financial sector, we chose the majority of companies operating in other industries (with the exception of Erste Group).

Colt CZ Group

The history of the company dates back to 1936, when one of the most modern was established armament factories in this part of Europe - Uherský Brod. After the war, the plants were nationalized. In 1992, the company was transformed into a joint-stock company. It is one of the world's largest producers of small arms, ammunition and military accessories. The Group sells its products under brands such as Ceská zbrojovka, CZ-USA, Dan Wesson, Zbrojovka Brno, Colt and 4M Systems. The clients include the army, the police and paramilitary formations. In countries with a more liberal approach to gun ownership, the company also supplies its products to individual customers. It is worth mentioning that the Czech company (still operating under the name of Česká zbrojovka Group) took over Colt's Manufacturing Company in 2021. CZG acquired Colt for $ 220 million in cash and stocks.

Source: own study

Colt CZ Group stock chart, interval W1. Source: xNUMX XTB.

Kofola

It is a company that, together with its subsidiaries, operates in the Czech Republic and foreign markets (in Europe). The most important foreign markets are Slovakia, Poland, Slovenia and Croatia. The origins of the company date back to 1887, when Gustav Hell, a pharmacist from Opava, developed a recipe for Colae syrup, which was an extract from cola seeds. The company itself was founded in 1960 in Czechoslovakia. Kofola quickly gained popularity among the citizens of Czechoslovakia. In the 70s, the annual production of a drink with a taste similar to Coca-Cola and Pepsi reached 180 million liters. The company produces and sells carbonated soft drinks, syrups, juices, tea and coffee-based beverages. The most famous brands belonging to the company include: Kofola, Vinea, Radenska, Studenac, Korunní, Rajec, Ondrásovka, Kalcia, Jupí, Jupík, Semtex, UGO, Leros, RoyalCrown. In addition, Kofola is also a distributor of such well-known brands as Evian water.

Source: own study

Philip Morris CR

It is a subsidiary of Philip Morris. The company's activity is focused on the Czech and Slovak markets. One of the production plants (in Kutna Hora) employs 800 workers and its activity dates back to the beginning of the 1812th century (1992). Prior to its acquisition in 420, the company operated under the name Tabak. The Philip Morris investment (including investments) was worth $ 90 million, which made it the second largest foreign investment in the Czech Republic in the entire XNUMX's. Since the purchase, Philip Morris has invested several billion CZK in the Czech Republic. Philip Morris CR distributes products under the HEETS, IQOS and VEEV brands. In addition, it also produces cigarettes from brands such as Marlboro, L&M, Philip Morris, Petra Klasik, Sparta and Chesterfield. Philip Morris is typical a dividend companywhich in the last 20 years suspended the payment of dividends only once (in 2020).

Source: own study

Philip Morris CR Stock Chart, Interval W1. Source: xNUMX XTB.

Erste group

It is an Austrian bank that focuses its activities on the CEE (Central and Eastern Europe) market. The bank's origins date back to 1819, when Erste österreichische Spar-Casse was founded in Leopoldstadt (then a suburb of Vienna). At the end of the 90s, the bank began to expand into the Central and Eastern European market. The reason was the great potential in these markets because during the period of the socialist regimes in this part of the world the level of banking was at a very low level. In 2000, Erste acquired a majority stake in the largest Czech bank - Česká spořitelna. A year later, the bank took over the largest bank in Slovakia - Slovenská sporiteľňa. Currently, Erste Group has over 15,7 million customers and has over 2 040 branches in 7 countries. The bank employs nearly 45 people. Erste Group is listed on the stock exchange in Austria, the Czech Republic and Romania.

Source: own study

Erste Group stock chart, interval W1. Source: xNUMX XTB.

THROUGH

CEZ stands for České Energetické Závody. It is a conglomerate of several dozen companies that mainly operate in the Czech Republic. The company produces, distributes, trades and sells electricity. In addition, it conducts heating, mining (including coal mining) and investment activities. CEZ is one of the largest companies in the Czech Republic and one of the largest energy companies in Europe. The company focuses its activities in Western, Central and South-Eastern Europe. The company provides services to over 3,5 million consumers. CEZ employs over 28 people. The company's shares are traded on the Warsaw and Prague stock exchanges. It is worth mentioning that the largest shareholder of the company is the Czech Ministry of Finance, which holds over 000% of the company's shares.

Source: own study

CEZ stock chart, interval W1. Source: xNUMX XTB.

ETFs for the Czech market

You can also invest in Czech companies through ETFs. However, it should be remembered that the Prague Stock Exchange has low turnover and marginal importance for global capital flows. For this reason, there are few ETFs offering exposure to companies listed on the Prague Stock Exchange. Only 5 ETFs in the fintal database have an exposure to the Czech market greater than 4%. It has the largest shares VanEck Uranium + Nuclear Energy ETF and Cambria Global Value ETF. The latter ETF includes companies such as CEZ, Moneta Money Bank, Komercni banka, Philip Morris CR. However, the shares of these companies do not exceed 9% of the ETF's assets.

Brokers offering stocks and ETFs

For example on XTB Today, we can find over 3500 equity instruments and 400 ETFs, a Saxo Bank over 19 companies and 000 ETF funds.

Broker
End	Poland	Denmark	Cyprus *
Number of exchanges on offer	16 exchanges	37 exchanges	24 exchanges
Number of shares in the offer	approx. 3500 - shares circa 2000 - CFDs on shares	19 - shares 8 - CFDs on shares	approx. 3 - CFD on shares
The amount of ETF on offer	approx. 400 - ETF approx. 170 - CFD on ETF	3000 - ETF 675 - CFD on ETF	approx. 100 - CFD on ETF
Commission	0% commission up to EUR 100 turnover / month	according to the price list	Spread depends on the instrument
Min. Deposit	PLN 0 (recommended min. PLN 2000 or USD 500, EUR)	0 PLN / 0 EUR / 0 USD	PLN 500
Platform	xStation	SaxoTrader Pro Saxo Trader Go	Plus500 platform
	REVIEW	REVIEW	REVIEW
	CREATE AN ACCOUNT	CREATE AN ACCOUNT	CREATE AN ACCOUNT

* PLUS500 CY offer

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 72% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.

CFDs on the Czech index

An alternative solution to an ETF or purchase of selected shares may be to invest in the Czech market through contracts for difference (CFD) on the most important index in the Czech Republic - PX. Of course, before investing, you should carefully analyze the costs of holding positions (swap points) and the possible rollover schedule. The Czech index is very rare in the offers of Forex brokers, but is offered by, for example, the Polish Brokerage House X-Trade Brokers SA. The leverage on this CFD is 1:10.

Broker
End	Poland
PX Index symbol	CZKCASH
Min. Deposit	PLN 0 (recommended min. PLN 2000 or USD 500, EUR)
Min. Lot value	Price * $ 100
Commission	-
Platform	xStation
	REVIEW
	CREATE AN ACCOUNT

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 72% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.