Stock markets: weekly report (September 22 - 28)

  • 1998-10-01
The outlook for the Baltic stock markets is still negative, because of bad environment for all emerging markets. There is big doubt over markets' stability and ability to cope with the fallout of the Russian crisis.

The markets in all three Baltic states are increasingly volatile. Total shortage of long-term investors is also a problem - the markets are speculative and short-term.

Analysts don't expect any positive changes this week.

The continued turmoil in formation of a Russian government will likely work against the Baltics as foreign investors remained wary of the entire region.

Riga: Unibanka continues to dominate RSE

Last week trading in Unibanka shares once again dominated the Riga Stock Exchange with 83 percent of the total turnover.

Shares trading in Riga Shipyard, Riga Transport Fleet and Valmiera Fiberglass accounted for between two and five percent turnover of each. Other shares comprised less than one percent of turnover.

Recently, the same situation was observed in Estonia, the result of which was that few shares of Hansapank remained in public hands and turnover plummeted by three to five times.

Such a fate likely awaits Riga Shipyard and Unibank. After a major reshuffling of Unibank's investors the bank's shares may practically disappear from the market. As no other issuer's shares even come close to Unibanka's in capitalization and liquidity, the average daily turnover could drop from its current level of 200,000 lats ($344,828) to 50,000 to 70,000 lats.

Last week the DJRSE Index sank another 8.06 percent to 121.21 points, and the RICI index 6.65 percent to 250.51 points. When Unibanka dominates the market, the DJRSE reflects the wider market. Last week Unibank's shares lost 8.66 percent.

Many specialists note that under the cover of redistribution of ownership of Unibanka, several major portfolio investors are abandoning the market. In particular the sale of a stake in Riga Transport Fleet was observed, which caused its share price to sink 11 percent.

Although there were major fluctuations in share prices of several companies, they hardly merit mention because of very small turnovers. For example, the share price of Salacriva'95 fish cannery rocketed up 43.5 percent on a turnover of just four lats.

Analysts don't expect any positive changes this week. With mudslinging and scandals peaking the final week before parliamentary elections, and more factories laying off workers, foreign investors will hardly be attracted to the Latvian market.

The continued turmoil in formation of a Russian government will likely work against the Baltics as foreign investors remained wary of the entire region. The dire situation in many U.S. investment funds and losses by major international banks doesn't bode well for a return of Western money to the Baltic markets. And as the Estonian market is in no better situation, if not worse, no investment from the north may be expected either.

Tallinn: TALSE falls in thin trading

Thin trading on the Tallinn Stock Exchange last week led to falling share prices with the TALSE Index sliding 4.51 percent to 118.56 points.

Uhispank broker Mart Helmja noted that trading was light all week.

"All movements were speculative and short-term, which increases volatility and creates and vicious circle," he said. "You can't even draw any parallels between news and trading."

Both in the case of Uhispank and Forekspank, brisker trading and price falls were brought on by insecurity, Helmja noted.

"Stray orders can bring major fluctuations to the market," he said.

Trading is mostly in four shares, the largest and most liquid - Hansapank, Norma, Uhispank and Forekspank.

Helmja hopes that trading will pick up this week.

Shares in Forekspank were the worst hit last week, spiraling down 27 percent to 18.65 kroons ($1.34).

Shares in EMV and Tallinn Pharmaceutical Factory also dropped considerably, EMV by 16.5 percent to 20.50 kroons and TPF by 19 percent to 6.05 kroons.

Uhispank's shares were also hit by speculation and were knocked off their long held price level of 30 kroons, finishing the week down 12 percent at 27. 5 kroons.

Shares in Norma held their ground at 14.10 kroons.

Turnover on the exchange totaled 90.99 million kroons. Hansapank's shares were the most heavily traded with 34.6 million kroons in turnover, followed by Uhispank at 22.3 million kroons and Norma at 18.6 million kroons.

Vilnius: Block deals liven up market

Trading on the Lithuanian National Stock Exchange was livened up last week with several major block deals which totaled more than 28 million litas ($7 million).

Trading on the Central Market was especially light, with shares in Rokiskio Suris and Vilniaus Bankas accounting for most of the deals.

There were no clear tendencies in the movement of share prices, and after fluctuating the Litin index ended the week down 4.96 percent at 418.63 points. The LitinA finished the week up 1.88 percent at 1361.58 points.

Trading in Rokiskio Suris dominated the Central Market with 1.4 million litas in turnover. Investors' interest can be explained by the dairy's intention to buy back 10 percent of its shares in order to maintain their market price. Since the end of April, the dairy's share price has plummeted almost 74 percent from 52.05 to 13.54 litas.

Trading in Vilniaus Bankas was also active at 1.05 million litas in turnover.

Investors lost interest in Hermis Bank with just 216,000 litas. Several market analysts believe Hermis may have significant assets tied up in Russia and don't expect the bank to meet its profit target.

The largest direct deal was in Lietuvos Draudimas insurance company's shares. At 4.14 million litas, about 5 percent of the company changed hands. Its share price fluctuated between 167.50 to 210 litas in the direct deals, while on the Central Market, its price slipped 1.43 percent to 192.71 litas.

A block of 1.35 million litas in Snaige shares also changed hands. Analysts speculate a Scandinavian investment fund bought the shares.

Despite livening up the market, analysts don't expect large direct deals to help maintain companies' share prices.

Moscow: Market doesn't exist

The activity in the Russian Eurobond market was weak. Prices gained on a general wave of rate reduction, which happened in emerging markets awaiting a cut in the interest rate by the U.S. Federal Reserve. Dollar nominated bonds of the Finance Ministry maturing next year (Investors wait for a default regarding these securities.) were traded with yield of 340 percent. Yield of longer Eurobonds made 40-70 percent - depending on their length.

The trade in Russian equities was also very weak. There were few buyers and no sellers. Amounts of deals made were as low as 10-40 a day. Russian Trading System index (RTS - Interfax) went down to 47 points, 6 percent, during a week.

The ruble strengthened to 15-16 RUR/USD on midweek and held within this corridor until the end of the week. Thus, a certain balance between demand and supply occurred. At present banks perform only ruble customer payments, preserving their dollar funds as they await newly printed rubles in the market.

Meanwhile, the International Monetary Fund said on Sept. 25 that the situation in Russia is critical, and it called on the government to move quickly to decide on a strategy to pull its crippled economy out of collapse.

"In the view of the mission, the economic situation in Russia is critical and must be resolutely addressed," said the statement released by the Moscow office of the International Monetary Fund.