TALLINN - After Teliasonera's recent takeover bid to acquire the shares in the Estonian and Lithuanian telecom daughter companies it doesn't already own, Scandinavian investors rekindled their interest in Baltic equities to such a large degree that investment company East Capital was forced to temporarily close new investments to its Baltic fund. East Capital says that there simply aren't enough companies listed on Baltic exchanges for investors to invest in, reports news agency bbn.ee.
Trading volume at East Capital was 600 million kroons (38.4 million euros) at the end of June, but it spurted to 1.1 billion kroons upon the takeover news. Gert Tiivas, head of East Capital's Tallinn branch, said that he doesn't recall a single situation previously where their funds have had to limit investing.
"Market capitalization has come down remarkably. Funds have important limits, or [else] they can't own more than a certain percentage of the company. Our decision means that if we had to spend that amount of money, then we'd cross the limits since markets and liquidity are simply so small," said Tiivas.
He noted that Scandinavians have kept away from the Baltic markets for years, adding that "Teliasonera's offer brought back attention. The low prices weren't noticed [before]. It doesn't take much, right?"
Sven Kunsing, member of SEB Wealth Management's management board, said that they don't have a fund that specializes in the Baltics, one reason as to why they haven't limited cash in- or outflows. "Local markets are like a liquidity trap. The markets are too small. Too few companies, and existing investment possibilities are concentrated in too few assets. Certainly the Baltics have a place in our asset management [portfolio], so we don't complain about cash inflows," he said
Kunsing says that it is mainly Swedes that are interested in Baltic stocks. "This is for historical reasons, and is now due to the takeover bid that was made for the telecoms. Perhaps Ericsson's recent investment hinted that perhaps there are possibilities for investment, despite the economic downfall," he said.
Kunsing noted that investors are waiting with interest to see what happens with Estonia's drive to join the euro. "No one really believes that we'll fill Maastricht criteria. If we do fulfill [the criteria], then East Capital would probably have to close its fund to investors for a longer period," he added.
