What's next for the Lithuanian Market

  • 2006-09-07
  • By Max Zavanelli
Not many people know that the Lithuanian stock market has been one of the world's best performing stock markets. The NSEL 30 index went up 338 % in the 3 year period 2003-2005. The average of all stocks traded went up 609 %. This year the NSEL 30 index is down 20 % year to date as are many emerging markets.

When I chose Lithuania for my investment and research base in late 1999, it had nearly 50 listed stocks. Stocks like Apranga and Mazeikiu Nafta sold for a fraction of their book value and less than cash flow. Some stocks were highly illiquid with most shares owned by the government or insiders, so I needed to have a good index to know how the market was doing and one that I could invest in.

Since I had long been a stock market theoretician and even worked on with the very first index fund in the world 's the S&P 500, it was an ideal selfish reason to form one to invest my own money! Therefore we founded the first mutual fund in Lithuania 's the NSEL 30 Index Fund 's fund to invest in the NSEL 30 index which we also created and since then it is successfully distributed by our partner SEB VB.

Emerging markets tend to go up and down like yo-yo's. They have huge standard deviations and tend to overreact in both directions. If you have a stable democratic society with rules of law and property rights then you reduce greatly the risk. Countries without laws and property rights can see stock markets lose huge amounts since everything is speculation and the average investor really doesn't own anything. Russia, for example lost 85% in 1998. This will not happen in Lithuania.

Currently Lithuania has 8% GDP growth and is likely to do 6-7% for years ahead. This is far superior to the old tired economies in Europe and it translates to be a superior investment for years to come. We have our own theory of stock prices called GRAPES 's for Lithuanian stocks as of date of June 30, the stock market is undervalued by 31%. A good time to buy.
If you would like further information, you can contact or visit my company IPV (office@ipv.lt) directly or visit our website http://www.nsel30indexfund.com and ask for a free copy of our book 's Guide to the Lithuanian Stock Market. It is the only book published on the market, it gives historical data and analysis/recommendations on all listed stocks on the Lithuanian Stock Exchange as of February 2006.

Max Zavanelli is distinguished Alumni Professor of Applied Research and Investments