Baltic stocks hit year-low on fears

  • 2007-11-28
  • Staff and wire reports
TALLINN - Baltic stocks sank to their lowest level in a year in the week ending Nov. 23 as foreign investors cut their exposure to risks connected with a possible devaluation of a local currency or a "hard-landing" in the region's overheated economies.

The Baltic Benchmark Index of blue-chip stocks fell 4.63 percent over the five trading-day period to 680.7, though it recovered slightly on Nov. 23 to reach 683.2.

In Estonia, which has the most robust equity market in the Baltics, the OMXT stock index fell 4.1 percent over the week.

"There was no positive news. Every other day there's talk of a devaluation of the kroon and general economic depression, both in and outside Estonia," Mart Veskimagi of SBM Pank, said. Rumors of a devaluation among the ethnic Russian community led to a run on euros in many currency exchange points.

"If at the beginning of the fall foreign capital stayed away from the Tallinn Stock Exchange, now foreign selling can be observed. But the earlier rise was also largely driven by foreign money," he said.

The apparel maker Baltika saw its stock plunge 15.2 percent over the week, while casino operator Olympic's stock finished 11.43 percent lower.

In Latvia, the OMXR index fell 7 percent to 619.2, its lowest since October 2006. Hansabanka broker Juris Jankovskis said that the week was one of the most dramatic since 1998, when the Russian economic crisis left an impact on the Latvian market.

"Investors' interest is not even materializing after such a large dive. Sellers are obviously dominating the market," he said.

Shares of the Lasco shipping company saw heavy trading over the week, and Jankovskis said that since summer there has been an active buyer of the stock, which has helped the company avoid a drastic drop in price.

In Lithuania, stocks were sold on fears that the government was not coping with the economy and imbalances might lead to a "hard-landing."

Arvydas Jacikevicius, a stockbroker at SEB Vilniaus Bankas, attributed the slump both to negative trends worldwide and fears over Lithuania's macroeconomic problems that, in his words, "to some extent, have been provoked by indifferent approach of our government" and the negative opinions of select foreign analysts.
"Investors fear that next year would be worse on the back of freezing of real estate prices and absence of transactions. The slump is also being provoked by psychological and technical aspects, which have hit stocks hard on the Vilnius Stock Exchange in recent weeks," he added.

Vaidotas Jonutis, a stockbroker with Finasta brokerage, said that the slump was also due to repo deals.

"Investors who borrowed funds will pay them back as a result of the dwindling value of their pledge, so they have no other choice but to sell the shares."

Some brokers tried to put on a brave face. "Inexperienced investors should not worry and succumb to the pressure of profiteers. The investment environment in Lithuania is quite good if assessing fundamentals," Dalius Kaziunas, CEO of Finasta, said.