Hot money driving shares higher

TALLINN - Due to huge demand and inflow of money, the Swedish investment company East Capital has temporarily closed its Baltic Fund, reports Swedish business daily Dagens industri. The positive activity from investors has been a reaction to the rapid rise in all three Baltic States stock exchanges in January. The Riga and Vilnius exchanges rose by 15 percent, while in Tallinn the figure was around 35 percent.

According to Marcus Svedberg, chief economic analyst for East Capital, investors have been reacting to forecasts that the future economic downturn in the Baltic States will not be as large as earlier predicted. Though January was a strong month for the exchanges, they are bouncing off low levels. Shares with potential for medium- and long-term growth can be bought very cheaply. Svedberg also pointed out that investors had positively evaluated Estonia’s prospects for joining the eurozone, which could take place as early as 2011.

At present, the East Capital ‘Baltic Fund’ is closed to new investors, as it has been difficult to invest the recent large inflow of money.
Analysts believe that it is not too late to “jump on the train.” However, East Capital is currently refraining from making predictions as to when its Baltic Fund will recommence trading. The fund places investments in shares of Baltic companies, and the fund’s share index reflects the market valuation of the share portfolio as a whole.

The share index of the Baltic Fund is up 23 percent since the beginning of the year. These results were only exceeded by the Baltic Fund ‘Danske Invest Baltic,’ which has recorded a 26.3 percent rise since the start of the year.