Falling Estonian shares reign in Baltic Index

  • 2001-02-22
Significant falls posted by several Estonian stocks last week prevented the Baltic Index from extending its winning streak, but just barely, as the index finished virtually unchanged. The euro price index of the 15 blue chip stocks listed on the Riga, Tallinn and Vilnius bourses stood at 133.90 as traders went home for the weekend.

The reason behind the index's fall was the more than 4 percent losses posted by both Eesti Telekom and Tallinna Kaubamaja. While Tallinna Kaubamaja is traditionally viewed by market makers as an unstable stock, subject to sharp fluctuations, the fall by Eesti Telekom was triggered by important developments both in Estonia and abroad. Estonia's Parliament last week adopted legislative amendments which, by their very nature, are restrictive for Eesti Telekom; factors abroad centered on weakness in trading in the world's leading telekom stocks.

The fall in Eesti Telekom's share price pulled the Baltic List's capitalization down from 2.75 billion euros to 2.7 billion euros ($2.44 billion). Weekly turnover of the Baltic List stocks was 5.56 million euros, up significantly from 3.75 million euros a week before, thanks to investors unloading large positions in Hansapank shares.

Estonian stocks accounted for 90 percent of the list's turnover while Lithuanian and Latvian stocks each had 5 percent. The Baltic List stocks led trading on the Latvian and Estonian national bourses, generating over 70 percent of the share turnover, while on the Lithuanian exchange the Baltic List stocks made up 17 percent of total turnover.

Estonia: Telekom hit by government ruling

The sharp drop in Eesti Telekom's stock last week overshadowed positive Hansapank results, with other price movements on the Tallinn bourse relatively small. "The week passed in anticipation of Hansapank's results, and Telekom's fall had a major impact," Uhispank's capital markets strategist Aivo Kangus said. The stock index TALSE shed 2 percent during the week, ending at 136.53. The price euro index of six Estonian Baltic List stocks was off 1.3 percent to 123.22. The exchange system's turnover of 570 transactions made in the five days totaled 90 million kroons ($5.23 million).

Eesti Telekom closed 4.1 percent lower at 81.50 kroons on a turnover of 16.7 million kroons. Kangus said the share's weakening could be attributed to amendments to the telecommunications law the Parliament adopted earlier in the week. Lawmakers amended the law on February 13 to limit the size of local call interconnection fees that Telekom subsidiary Eesti Telefon may demand from other operators. "Telekom's price was further affected by global insecurity as expressed in steep rises and falls," Kangus added, referring to volatility on world markets. For example, Europe's three top telecom groups were hammered as the spotlight fell on their growing mountain of debt, ending a dismal week which saw their shares savaged following a flotation flop for France Telecom's mobile outfit Orange. The ratings agency Standard and Poor's downgraded the debt of France Telecom, maintained the ranking for Deutsche Telekom's debt and then warned that British Telecom could be downgraded as its debt was put on the CreditWatch list.

The week's most-traded security was Hansapank with 49.4 million kroons in turnover. The share closed 0.7 percent off at 139 kroons in spite of the company releasing better than expected 2000 results.

Norma posted a gain of 0.4 percent, ending at 48.80 kroons on turnover of 11.1 million kroons.

Latvia: Latvijas Gaze in for tough times ahead

These are quiet times for brokers and investors, as trading volumes are dropping to almost non-existent levels on the Riga Stock Exchange. Last week saw no change in this trend, as activity fell almost two times over the previous week, with share prices unchanged. The capitalization index DJRSE dropped 0.6 percent to 140.26 while the price index RICI edged up just 0.01 percent to 163.79. The euro price index of the four Latvian stocks listed on the Baltic List also rose just 0.2 percent, closing at 156.06. The weekly share turnover on the bourse was just 216,000 lats ($348,900 dollars).

Latvijas Gaze emerged as the uncontested market leader in terms of turnover and, at 128,000 lats, accounted for 59 percent of total bourse turnover. Shares slid 0.5 percent, closing at 3.7 lats. The fall in the gas company's share price is most likely due to feelings that, when net profit for 2000 is reported, it will unlikely meet earlier inflated expectations of 5.5 million lats. Moreover, the gas company's profit target for 2001 has now been set at two times lower than in 2000. Amid falling profitability, only the existing major shareholders, Gazprom, Itera, Ruhrgas and Fortum, are expected to bid for the gas company's shares. At the same time, though, small shareholders are likely to be offering to sell their shares.

From other official and second list stocks, Latvijas Balzams and Balta were noteworthy. Trading in Balzams generated a 30,000 lat turnover, with the share price unchanged at 0.35 lat per share, while Balta shares worth 14,000 lats changed hands, its shares gaining 1.2 percent, closing the week at 4.15 lats.

Trading in all the other stocks was purely symbolic as their weekly turnover did not exceed 10,000 lats. No sharp price changes were recorded amid the low turnovers. Most experts believe the coming week is unlikely to bring about any revival in the market, either, with more positive dynamics on the bourse expected in April at the earliest, when companies release their quarterly reports.

A surprise outcome in the local elections on March 11 could possibly shake things up for the market.

Lithuania: Take-over news, strong earnings drive market

Electronics producers Ekranas and Vilniaus Vingis, and shipping firm LISCO stole the spotlight on the Lithuanian market, driven by a string of good corporate news. The continuously tracked price index Litin-10 firmed 2.6 percent to 1247.83, while the blue-chip Official List index Litin was down 0.2 percent to 465.69. The broad index Litin-G edged up 0.6 percent to 1079.15. The euro price index of five Lithuanian Baltic List stocks grew 1.3 percent to 128.98. The overall NSEL equity turnover for the week reached 5.97 million litas ($1.49 million).

A slow upward trend prevailed in the market during the short four-day trading week, brokers said. Shares in electronics companies jumped at the start of the week, and other major stocks followed in their footsteps on February 15. Blue-chip Lietuvos Telekomas remained the most actively traded stock on the central market, but market participants said investor interest in the company had flagged after the company announced that it would not release its results for 2000 until late in March. The share price fell 0.4 percent amid 776,248 litas turnover.

Refrigerator producer Snaige slid 1.3 percent to 36 litas amid a 119,300 litas turnover, and brewer Kalnapilis climbed 5.8 percent to 4.50 litas on a 94,100 litas turnover. Dmitrijus Dutovas, head of Baltic Securities, attributed Kalnapilis' gains to renewed rumors that the Nordic group Baltic Beverages Holding would choose to sell the brewery. BBH president Christian Ramm-Schmidt said on February 14 that decisions as to which of the three largest Lithuanian breweries - Kalnapilis, Svyturys, or Utenos Alus - would be sold should be announced on February 21.

Cheese maker Rokiskio Suris eased 1.9 percent to 20 litas with just 30,000 litas worth of shares traded, while knitwear maker Utenos Trikotazas saw no activity in the outgoing week. Electronic component maker Vilniaus Vingis led trade on the Current List after the announcement that the company's board intends to pay a dividend of 0.9 litas per 5-litas face-value share for 2000. Vilniaus Vingis ended the week 0.8 percent higher at 5.80 litas on a 492,900 litas turnover.

TV-tube maker Ekranas charged ahead by 9.4 percent to 9.25 litas on a 449,600 litas turnover following a flurry of good news.

The company reported rising profits and sales for January and said it filed a request with the stock exchange's board to include its shares in the blue-chip Official List. LISCO surged 14.1 percent to 3.30 litas in trade worth 418,200 litas.

Much of the gains came on February 15 amid renewed hopes that the Danish shipping company DFDS Tor Line, the potential buyer of a majority stake, might take into consideration demands by LISCO minority shareholders. During meetings between DFDS Tor Line representatives and LISCO minority shareholders, the Danes promised to put forward proposals as to the acquisition of shares from minority shareholders and offered them to swap their shares for shares in the Danish company.

Gas utility Lietuvos Dujos was off 0.6 percent at 1.64 litas amid 106,600 litas, while other Current List stocks were largely inactive. In block trading, 2.52 million litas worth of shares in hardboard and tissue paper maker Grigiskes were bought, presumably by an investor interested in participating in the company's management.

Suprema broker Arvydas Jacikevicius said it was difficult to predict further stock movements in the near term, with trading volumes being rather low. He added that trading should pick up speed ahead of annual shareholder meetings and the release of corporate results for January.