Stock markets: weekly report (August 15 -Ê21)

  • 1998-08-27
Estonia: Hansapank shares carry the TSE

Thanks to Swedbank's aggressive purchasing of Hansapank's shares pushing up the bank's share price the entire Estonian market ended the week on the upside.

Compared to neighboring markets suffering the consequences of the devaluation of the Russian rouble, the Estonian market was quite stable.

The strong rise of Hansapank's share price on the Helsinki exchange on Friday also generated interest in other popular Tallinn stocks and as a result the TALSE index shot up nearly 10 percent.

Talinvest Suprema manager Veiko Maripuu told BNS that one of the major buyers of Hansapank shares continued to be the Alfred Berg investment bank, which is likely acting as an intermediary for Swedbank.

Maripuu predicted that the rise in share prices could continue this week, although not as strong.

"At the same time, major investors may pull back from the market for a while like they did last week," he noted.

"Everything depends on whether the interest of Scandinavian investors continues, because as long as we have strategic investors it makes relatively little sense to talk about the macro-environment," Maripuu said.

"If there wasn't any interest from Scandavians, most investors would be on the selling side now," he said. "Many foreign investors consider us as one region with Russia and they are selling at present."

At the end of the week Hansapank's shares were up 9.63 percent to 67.5 kroons. Its Friday close was higher than 71 kroons.

Shares in Forekspank, despite a strong rebound on Friday, ended the week down 12 percent at 37 kroons.

Shares in Uhispank were down 3.3 percent at 32.82.

The leader of the industrial sector, car safety belt manufacturer Norma, skidded two percent to 24.17 kroons.

Turnover totaled 210.5 million kroons last week. Trading in Hansapank shares dominated trading at 170.8 million kroons, accounting for more than four-fifths of the total.

Turnover of Uhispank and Forekspank share barely topped one million kroons, as well as trading in Norma and Harju Elekter's shares.

Latvia: Russian shock waves sends shares tumbling

Last week share prices tumbled on the Riga Stock Exchange, outdone only by the staggering crash on the Russian Trading System.

The Dow Jones Riga Stock Exchange (DJRSE) Index spiraled down 16.42 percent, which begs the use of description crash.

The RSE's other index - RICI - was down "nine" percent, and capitalization of local shares sank 11 percent.

The steep fall in the DJRSE can be explained by the collapse of bank shares. Rigas Komercbanka's shares were particularly hard hit, plummeting 33 percent from 1.66 to 1.10 lats. The floor dropped out from under the bank's shares when rumors that it had sizable investments in Russian securities started to make the rounds on Wednesday. According to the rumor, up to 15-25 percent of the bank's assets are in Russian securities.

According to unofficial information other banks' holdings in Russia do not exceed 5 - 10 percent of assets.

Market participants are afraid that the Bank of Latvia will demand that banks have 100-percent reserves for their Russian assets. That would wipe out most banks 1998 profits and maybe 1999 profits as well.

The drop in Unibanka's shares was also quite staggering - by 19 percent from 1.47 to 1.19 lats. The main reason was the appearance of 3 million bonus shares on the market. It must also be noted that a realignment of the bank's shareholders is currently going on, to which the large block deals which occured on Friday topping 300,000 bear witness.

If the Tallinn Stock Exchange can be called the Hansapank market (with all 80 percent of turnover) then the RSE can be called the Unibanka market as trading the bank's shares dominated with 70 percent of turnover. The major difference, however, was that the change of Hansapank shareholders boosted the bank's share price, while Unibanka's skidded down further.

Another difference is that trading of Hansapank's shares in Helsinki has driven the price rise in Tallinn. Trading in Unibanka GDRs in London, however, has driven the bank's share price down in Riga. Unibanka's GDR closed higher in London on Friday, giving some hope that there may be a rebound this week.

The direction share prices move this week will continue to depend on events in Russia. At the beginning of the week the Russian government is expected to announce conditions on conversion of rouble debt obligations. There is more hope that the conditions will be more favorable for foreign investors than originally feared.

Lithuania: Share prices continue to slide

Share prices on the Lithuanian National Stock Exchange continued to slide last week, although Official list shares stabilized on Friday.

Experts forcast a positive correction in share prices for liquid shares this week as buyer interest picked up considerably at the end of the week.

Stabilization wasn't able to reverse the downward tendency, however. The Litin index slid 7.32 percent last week to 588.96 points. The LitinA was down 3.29 percent at 1477.79 points on Friday, a historical low.

Although turnover more than doubled to almost 22 million litas, trading in shares was only around seven million.

Trading in Vilniaus Bankas' shares was most active at 881,000 litas. However the bank's share price slid 8.09 percent to 27.71 litas on Friday.

Hermis' share price shed 6.33 percent to 117.5 litas with just 544,000 litas in turnover.

On the current list trading in Svyturys brewery's shares was most active with 638,000 litas in turnover, with its share price holding at 58 litas.

Lietuvos Energija's share price also held firm at five litas with continuing high demand, although offer increased on Friday.

Brokers believe that after the news that the Swedish energy company Vattenfall is buying up Lietuvos Energija's shares small investors may stop selling at five litas and wait for a higher price.

Many experts believe the market will stabilize this week.

"Although we aren't there it's in sight," Hansabank Markets broker Aivaras Abromacicius told BNS.

He predicted that after Fitch IBCA's accouncement that the Baltics aren't suffering from the Russian crisis one can expect more activity from foreign investors.

Russia: Black week for stocks

Russian stocks ended one of their worst ever weeks Friday to close almost 30 percent lower, as equities continued a seemingly endless nosedive while deputies and the government traded blows over Russia's financial crisis.

The ruble also lost further ground, breaking through the seven rubles per dollar threshold which the government said earlier this week was a realistic exchange rate following its de facto devaluation on August 17.

The battered Russian currency changed hands at 7.005 to the dollar in interbank trade August 21 morning, having lost 10 percent since the government said August 17 it would allow the ruble to drift to 9.5 to the dollar by years' end.

The move, accompanied by a government default on its domestic debt and force restructuring of the T-bill market, hit markets like an A-bomb, and left the banking system on the brink of outright collapse.

In equities, the meltdown continued unabated, the benchmark Russian Trading System (RTS) index closing at 81.76, a 5.56 percent drop which left the market at a new 28-month low for the fourth consecutive day.

The index, which stood at 410 points at the start of the year, has lost more than 80 percent of its value as investors stampeded out of the country amid fears of a debt default and ruble devaluation.

Market leader Unified Energy Systems led Friday's collapse, shedding 20 percent in the first two hours' trade, before clawing back some losses to end the day down 11.4 percent. However, dealers said most share values were now scarcely indicative, the market being totally distorted due to a lack of liquidity.

"This has probably been the worst week since the days before the presidential elections" in July 1996, said Denis Rodionov, a fixed income analyst at Brunswick Warburg.

"The market will watch current developments in Russia very closely trying to judge if the situation is stabilising or if it's going to be a full crash," he said, with the ruble in freefall, a rush by ordinary Russians to switch their savings into dollars, and political instability.

With the market hemorrhaging heavily, investors are now anxiously awaiting the government's plans to restructure the domestic debt market, frozen Monday as it announced a de facto ruble devaluation. "The market is ready for the worst," Rodionov commented.

"The Russian crisis has blown up an ill wind," said Thierry Malleret, chief economist at the Alfa Capital investment bank. "There is a crisis brewing which will go beyond Russia and engulf the global economy.

"A gentle evolution or improvement in the situation is totally out of the question for the moment. The crisis will be terribly painful for the population and interest groups."

Traders said the market was clinically dead, volumes having slumped to a wafer-thin 4.1 million dollars, compared to 100 million dollars at the start of the year.

And there was no solace for investors in parliament, where deputies voted a resolution calling on President Boris Yeltsin to step down, and even hitherto pro-government leaders urged premier Sergei Kiriyeno and central bank chief Sergei Dubinin to quit.

"There is almost no market," said Michael Portnoy, a trader with the Rinako Plus brokerage. "Whatever is left of the market reacted negatively."

"It's practically paralysed, and a lot of trading has switched to ADRs (American Depositary Receipts) in London and Berlin," he added.

Although markets had expected devaluation, sentiment had turned "negative as the government aknowledged they don't know what the next step should be," said Rodionov.

Russian financial markets have been in crisis for months over fears that a chronic hole in the federal budget would translate into mounting borrowing, a debt default and ruble devaluation.

(Compiled from BNS, brokerage companies reports.)