Stock markets: weekly report (June 29 – July 6)

Baltic states
Latvia: Inactivity, immaturity prevents larger fall.
Last week the Riga Stock Exchange was once again relatively stable compared to it's Baltic neighbors', which experienced sharp falls. However this is of only slight consolation as this stability was the product of inactivity on the bourse, which saw only only 576,000 lats in turnover last week.
The DJRSE Index was down 3.2 percent last week to 205.88 points, while the RICI was off just 0.3 percent to 382.51 points.
The larger fall in the DJRSE was due to shares in Unibanka falling 4.5 percent, which has a large effect on the index.
On the Official List the biggest loser was Daugavpils Drive Chain Factory, whose shares lost 8.5 percent to just 32 santims. From the Second List shares in Liepajas Metalurgs were the worst hit, down more than 14 percent to 30 santims. Liepajas Metalurgs' shares were also removed from the calculation of the DJRSE and RICI indeces.
The fall in Daugavpils PKR's and Liepajas Metalurgs' shares can be explained by their heavy dependance on the Russian market. Besides major financial problems in Russia last week, Russian-Latvian relations took another turn for the worse when Russia removed transit discounts for Latvia and Russian leaders made more unfriendly gestures towards Latvia, including threats to remove Latvia's MFN trading status.
Last week's biggest winner was the Kaija fish proccessor, which gained 8.33 percent to 0.52 lats. The rise can be attributed to high profit announcement for 1997 by the cannery's major shareholder, Ave Lat Grupa. However Kaija's announcement of 36,000 lats profit for the first five months doesn't arouse much optimism as it is only 6.42 percent of the company's annual profit forcast of 560,000 lats.
Comparing Latvia's and Estonia's bourses at first reveals a somewhat surprising and paradoxical situation — the much more developed Estonian securities market is falling much faster than Latvia's. However a closer look provides the explanation – the Tallinn Stock Exchange is hostage to repossession deals.
According to several sources until recently the volume of shares held as collateral in repossession deals exceeded the real volume of the market by several times. While this holds no danger in a rising market, in a steadily falling market it is a catalyst for further rapid falls.
Thus in a rather paradoxical manner Latvia's securities market has benefited from its relative underdevelopment. One would hope the Latvian Central Depository will consider the Estonian's negative experience when it develops its rules for repossession deals.
The RSE is likely to remain inactive this week until companies begin reporting their half-year results. If company results confirm the market's optimistic expectations then there could be an upward price correction in the middle of the month. However in the face of continuing problems in Southeast Asia and in relations with Russia, it is unlikely any positive trend could be maintained for long. Despite the drop in the share of foreign investors on the RSE, they are likely to play a key role in determining the direction of the market for a long time to come.

Estonia: Bad news brings another fall
Bad news last week surrounding possible losses at Hoiupank's Money Market Fund and further falls on the Russian market affected the Tallinn Stock Exchange. The TALSE Index ended the week down 11.13 percent to 122.60 points, retreating to the level of November 1996.
HF Kapital Broker Riho Talumaa said that Friday's fall was caused by the Thursday evening announcmenment that the repurchase of units in Houipank Money Market Fund was being temporarily halted and by an article in Postimees that a lawsuit against Hoiupank could halt the bank's merger with Hansapank.
In Talumaa's opinion there is more room for the market to fall. "It seems that there are some repossession portfolios that haven't been liquidated yet."
Brokers said the downturn of the Russian market hit shares in Forekspank and Norma hardest. They posted the largest declines of shares on the main list.
Forekspank announced at the beginning of the week that it would not buy a 35 percent stake in the Moscow-based Pioneer Bank because of serious irregularities discovered during an audit.
Shares in Hansapank, Hoiupank and Tallinna Kaubmaja were also hit hard, shedding more than 14 percent.
However the largest fall on the Exchange was in shares in Leks Kindlustus. Shares in the insurance company fell 30 percent upon the news that Erioli had filed a claim against Leks and was trying to force the company into bankruptcy.
According to Talumaa the decision of the TSE's listing committee to suspend trading of Rakvere meat packing company and Kalev chocolate factory was unprecedented but it has hurt the reputations of both companies. Companies are allowed to be quoted on the TSE's free list for only one year, and both Rakvere and Kalev need to take additional steps to get their shares listed on the additional list.
Turnover on the TSE totaled 177.6 million kroons last week. More than half of trading was in Hansapank shares at 105.7 million kroons.

Lithuania: Descent downward continues
Last week the Lithuanian National Stock Exchange's descent continued nearly unabated.
The Litin Index of the Official List finished the week down 6.52 percent to a record low of 699.74 points. Like its Baltic neighbors, the LNSE has been thrown back a year-and-a-half.
The LitinA Index, however, was off just 0.53 percent at 1619.77 points on Friday.
Compared to the previous week, the trading volume was down by 6.5 million litas to 18.5 million litas.
Almost all of the Official List shares were down last week as well as an overwhelming majority of Current List shares.
Many popular shares have sunk to the lowest prices of the year. This includes Vilniaus Bankas which lost 9.57 percent last week to 38.54 litas, as well as Hermis Bank which shed 6.58 percent to 137.95 litas on Friday. Kalnapils brewery also finished last week at a recordlow at 7.10 litas.
Trading in Hermis shares was the most active last week at 1.6 million litas. Brokers say investors are attracted by the low share price.
Shares in Lietuvos Energija continued to enjoy strong demand with 600,000 litas in trades last week and held at the five litas price level.
Trading in Lietuvos Dujos shares was more active at 823,000 litas, but the company's share price fell 2.04 percent to 0.96 litas.
Investors also had a taste for beer, trading almost 600,000 litas in shares of the Klaipeda's Svyturis brewery. Its share price was off 0.79 percent, however, at 60.64 litas.
Investors hope that the company's financial performance will improve as the brewery will likely enjoy further demand for its beer in the summer season, and is a far more attractive investment than its competitor Kalnapils, which is trying to maintain its market share.

Russia: Stocks Hit Another Two-year Low
During last week the Russian Trading System's benchmark RTS Index has hit yet another two-year low after falling 1.03 percent to 144.21 on July 2.
The RTS, which runs the electronic system that is Russia's biggest share marketplace, said that the index had last been as low as 144 in late May - early June of 1996. The index has fallen 64% since the morning of January 3, 1998, when it stood at 401.3.
However, on July 3, Russian stocks recovered 6 - 8 percent of their value on the positive news about settlement of the conflict between Gazprom gas monopolist and the government. Some players expect a deal on a stabilization loan with the International Monetary Fund is to be concluded soon.

Compiled from BNS, brokerage companies reports.