Baltic stock exchanges plan to join NOREX

RIGA - While various experts are discussing the future development of the Baltic capital markets, the three Baltic states' stock exchanges have started to move westward on their own.

The bourses of Riga, Tallinn and Vilnius have decided not to create the joint Baltic trade system, but to join the NOREX alliance instead. The letter of intent has been signed, the preparatory work started, and the whole project is planned to be completed by the end of 2001, Uldis Cerps, president of the Riga Stock Exchange, told The Baltic Times Oct. 6.

"We have agreed that there is no use in creating the joint Baltic stock exchange, and we have to join NOREX. Without it the independent Baltic exchanges are not attractive enough," Cerps said.

NOREX, the alliance between the Nordic countries' stock exchanges, includes the exchanges of Stockholm, Copenhagen and Reykjavik. The Oslo Stock Exchange has also signed a letter of intent to join NOREX. All of those exchanges employ the joint trade system SAXESS, which allows its members various advances like cross-membership, a possibility of trading in other exchanges within the system.

These plans coincide with the workshop on capital markets development in the Baltic region, held by the Organization for Economic Co-operation and Development (OECD) in Riga on Oct. 3. - 4. The seminar ended with a decision to prepare a capital market report for the Baltic countries. "In order to successfully participate in the world's financial system, (one) needs to have robust financial structure: sound banking system and proper supervision of it, Hans Blommestein, head of Capital Markets program within the OECD secretariat, said at the press conference on Oct. 4. "Also, the participants of securities market need to be well-capitalized and know what they're doing," he added. However, he was not specific on whether the Baltic capital markets meet these requirements. Also, his report of the conference was named confidential. However, some experts noted that this was done in order to hide the lack of competence. "The workshop was a complete waste of time," one of them told The Baltic Times.

With Baltic stock exchanges joining NOREX, their members - banks and brokerage companies - will have the possibility to trade freely within seven countries' capital markets, according to Cerps. With the merger, the investors active in Stockholm or London markets will be able to invest in the Baltic securities by using all cross-members.

"The merger with NOREX will certainly consolidate the market," Aldis Sipols, the securities department chief of Latvijas Krajbanka, told The Baltic Times. "I hope that it will increase the liquidity of our best stocks." He stressed that the issue of costs for the incorporation into NOREX system is also urgent for the members. "I think it might be expensive," Sipols said.

Janis Oksts, chief of the brokerage department for Merita Nordbanken Latvia, said that the participation in NOREX won't bring any significant changes. "Latvian investors will get better access to the Nordic stock exchanges and more information on the securities listed there," he said.

Oksts was skeptical over possible investment increase. "We have nothing to offer to the investors (in Latvia). If Unibanka will leave the market, there will be nothing left."

Cerps disagreed with him. According to the statistics of the Riga Stock Exchange, in the first eight months of 2000 the turnover of Unibanka shares was down to 4 percent from the total securities' turnout of the stock exchange, compare to 36 percent in 1999, he said.

Total turnover of the Riga Stock Exchange in the first eight months of 2000 was 604.46 million euro, the Tallinn Stock Exchange - 219.16 million euro, and in the Lithuanian National Stock Exchange - 222.47 million euro.

Only privatization of large, profitable state enterprises like Lattelekom and Latvenergo, and placing them on the stock exchange would attract investors to the Latvian stock market. Also private companies might go public, Oksts stressed. He predicted also the Latvian mobile telecommunications operator Baltkom GSM, which was recently sold to the Swedish NetCom AB, would be on the stock exchange within a couple of years. "It is profitable for businesses to keep the controlling stock and sell the rest to get a part of their investment back," he said. (See related story on page 11.)