Stock markets: weekly report (October 20 - 26)

  • 1998-10-29
Baltic banks' hunting for foreign investors received more intrigue last week after press reports appeared that Sweden's Skandinaviska Enskilda Banken(SEB) is seeking to acquire a one-third stake in Estonia's Uhispank. Foreign interest toward Baltic banks is currently the major positive factor for the troubled stock markets.

Analysing SEB's intention, it is worth to mention that the London-based Nomura International investment bank said it has great interest toward a merger of Estonian Uhispank, Latvian Unibanka and Lithuania's Vilniaus Bankas. It is clear, that Nomura will try to have a major stake and influence in the new Baltic superbank which would result from a merger.

But many questions still remain unanswered. Although Unibanka's president last week said the three banks' merger is inevitable, Vilniaus Bankas and Uhispank still take more carefull position on the issue, avoiding strong statements to the press.

Another new player in this game is Riga Commercial bank(RCB). According to unconfirmed reports, two big Scandinavian banks and Latvian Rietumu Banka intended to buy a controlling stake in RCB. The time for buying is very good as the current price of RCB shares is 4 times below its 1998 maximum level.

Estonia: Bourse governed by interest in Uhispank

The trend of the Tallinn Stock Exchange this week was determined by a press report Thursday that Sweden's Skandinaviska Enskilda Banken is seeking to acquire a one-third stake in Uhispank.

The TALSE index finished the week at 103.42, down by 3.59 percent from last Friday.

"Without the Uhispank news the market would have gone down more," Talinvest Suprema broker Riho Talumaa said.

According to the broker, the situation on the market is still unstable, as none of the parties involved has issued an adequate comment on the claims published in the newspapers.

Trading concentrated on Uhispank shares on both Thursday and Friday. Despite an hour's suspension on Thursday, the stocks were the most traded on both days.

The turnover from deals with the bank's shares totaled 41.5 million kroons ($3.2 million), accounting for slightly more than half of the exchange system's total for the week.

Whereas on Thursday mostly local speculators were buying Uhispank, then on Friday the interest came from Helsinki, Talumaa said. "The local market was on the selling side Friday."

The amounts that changed hands in Helsinki were negligible, he said, and therefore it is unlikely SEB is buying up the shares on the Finnish market similarly to the Hansapank scenario.

Uhispank, which started the week with a 9 percent plunge, traded at an average of 27.62 kroons, up by 10.35 percent.

Hansapank was driven up to nearly 70 kroons last week in anticipation of the shareholders' meeting endorsing a planned share issue. After the meeting gave the green light to the issue, the stocks started inching down to an average 56.82 kroons on Friday, 10.7 percent lower against the previous week.

The turnover at 17.5 million kroons made up only 21.7 percent of the week's total.

The volatile Forekspank tumbled to an average of 7.90 kroons , a drop of 26.17 percent from last week, on a turnover of 4.6 million kroons.

The stock exchange's listing commission was not satisfied with Tallinna Farmaatsiatehas's application to withdraw from the bourse because of small interest in the shares and a changed economic environment, ruling to quote the stock on the supplementary list instead of the main list starting from Oct. 27.

The week's only transaction with the drug maker's shares was made on Friday, and brought the price down by 60 percent to two kroons.

The Estiko concern and Saku brewery released their nine-month economic results this week. The Tallinna Kulmhoone frozen food producer made known its results for the January-September period, Oct. 23.

Talumaa said the indicators were good, but owing to the shares' poor liquidity the price rose no more than one kroon to 12 kroons.

Latvia: DJRSE index falls below 90 points

In the middle of last week the DJRSE index fell below the psychologically important level of 90 points and did not succeed in climbing back by the end of the week.

With the exclusion of Rigas Komercbanka and Balta Insurance companies, the prices of all other more or less liquid shares dropped sharply. Among the record dives was the 52 percent fall in the price of Rezekne Canned Milk Factory's shares, and the 32 percent crash in the share price of Latvijas Balzams.

The increasing number of pessimistic economic forecasts contributed to the sharp drop in share prices, as well as the jump in interbank interest rates.

The listing of Ventspils Nafta on the bourse did not lead to the expected rise in turnover. On the contrary, it was down 23 percent to just 380,000 lats ($678,500).

Ventspils Nafta also did not bring about the expected surge in market capitalization Ñ at the market price of just 0.82 lats the company added only 208 million lats to the bourse's capitalization.

Latvia's market capitalization continues to lag considerably behind Estonia's and Lithuania's, and their total capitalization at the moment is less than 2 billion U.S. dollars, which is clearly insufficient to attract the attention of foreign investors. Trasta Komercbanka broker Uldis Bulavs believes that the unification of the three exchanges is the only way to revive them.

The publication of nine-month earnings did not make things easier for investors. Only Riga Transport Fleet and Liepaja Metalurgs have a reasonable chance of meeting their earlier 1998 profit targets Ñ and a rise in their share price.

Rigas Komercbanka's shares also have the potential to rise. Last week the bank's shares soared 22.5 percent. Their further movement will depend on the bank's nine-month results, as well as to the course of negotiations with potential investors, both domestic and foreign.

Of those companies which have still not published their results, interest has focused on Riga Shipyard and Balta Insurance.

With the situation in Russia unlikely to improve in the near future, the prospects of food and pharmaceutical companies look bleak. With little demand for shares in these companies their prices could dive to zero. A good example of this is shares in Grindex's subsidiary Tallinn Pharmaceutical Factory. Last week these shares dropped to two kroons, down from the 100 kroons per share Grindex paid for them six months ago.

The millions in "Russian" losses at Grindex's competitor Olainfarm also do not help restore confidence in the sector. The liquidity in Olainfarm's shares has practically dried up in the past few weeks.

The market is unlikely to liven up this week. If the turnover does increase, it will most likely be small. Ventspils Nafta's share price will likely fluctuate considerably as its market has not stabilized, and is sensitive to news.

Latvia's financial sector will be watching developments with Estonian Uhispank's and Rigas Komercbanka's search for investors, which will no doubt have an influence on Unibanka's share price.

Lithuania: Trading slack on Vilnius bourse

Last week trading on the Lithuanian National Stock Exchange was very slack.

Although the bourse's turnover was almost 20 million litas ($5 million), most of the bid deals were in T-bills, accounting for 70 percent of turnover.

Despite the light trading all of the market indexes rose slightly. The Litin index notched up 0.69 percent to 371.96 points, and the LitinA 0.19 percent to 1229.04 points.

On the central market trading was most active in Rokiskio Suris dairy, and both of the banks on the Official list Ñ Vilniaus and Hermis.

Rokisikio Suris' share price climbed 8.07 percent to 17.68 litas on a turnover of 570,000 litas.

Vilniaus Bankas' share price rose 6.73 percent on a turnover of 518,000 litas.

Hermis' shares shed 5.94 percent to 52.73 litas on a turnover of 409,000 litas.

There was almost no interest in the manufacturing sector shares on the current list, with investors preferring to conduct direct deals.

The biggest direct deal was in Dirbtinis Pluostas artifical fiber manufacturer. For 1.2 million litas, 1.28 percent of the company's share capital changed hands. At one litas the investor paid double the market price, but on the central market the shares had no demand.

There were also a significant number of direct deals, totaling almost 753,000 litas.

Suprema brokerage's analysts expect no changes in the market this week, with small deals dominating the bourse and leading to small changes in share prices.