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Stocks trend lower on Baltic bourses

  • 2000-12-07
Trading was rather slow on all three Baltic stock exchanges in the outgoing week as a general downward trend prevailed. The Baltic Index comprising 15 Latvian, Lithuanian and Estonian blue-chips was off 1.1 percent to 132.13, with losers outweighing gainers ten to four, and Eesti Uhispank unchanged. Com-parising the situation in the Baltics with developments on neighboring stock markets, it can be concluded that share prices in the Baltic states have dropped roughly at the same rate as prices on most stock exchanges in Eastern and Western Europe.

Meanwhile, Russian prices were hit hard, with the local RTSI index sinking to the 140 point level, similar to Riga's DJRSE and Tallinn's TALSE. The last time the Russian and Baltic indexes sat at the same index level was about one year ago, though from that point the RTSI subsequently ran up to 240.

The Baltic Index last week was brought down mainly by declining Estonian and Latvian stocks, though Lithuanian indexes were able to increase a little over significant jumps in Kalnapilis and Rokiskio Suris shares.

The largest shares in the Baltics, Estonian and Lithuanian telecoms, moved downwards, however, reducing Baltic List capitalization by 2.6 percent to 3.16 billion euros ($2.72 billion) by week's end. As of Dec. 1 capitalization of Estonian Baltic List stocks was 1.77 billion euros (-3.3 percent), for Latvian stocks it was 602 million euros (-2.1 percent) and for Lithuanian stocks 786 million euros (-1.9 percent).

Total Baltic List turnover was just 5.3 million euros, including 65 percent contributed by Estonian stocks, 13 percent by Latvian stocks and 22 percent by Lithuanian stocks. In Estonia the Baltic List stocks represented over 70 percent of the total turnover on the local bourse. In Lithuania this figure was 57 percent and in Latvia only 35 percent.

Estonia: Market psychology turns negative

Prices of key shares moved predominantly downwards on the Tallinn Stock Exchange last week, pushing the TALSE index lower by 2.8 percent to 139.10. The price index of six Estonian Baltic List shares was off 2.3 percent to 114.08.

"The week was emotional and insecure, affected by global movements," Uhispank capital markets strategist Aivo Kangus said. He added that turnovers were also small, and this provides grounds to conclude that there is not much selling interest and some insecure buying interest on the market. Trigon Securities broker Kristel Kivinurm said the pessimism surrounding the Estonian stock market deepened on the heels of a weakening telecommunications sector and unstable U.S. markets. "In the lack of buying orders, most major shares moved down on low turnovers," she said.

The prices of shares in Eesti Telekom dropped 4.6 percent to 92 kroons ($5.16) on turnover of 14.6 million kroons. Hansapank shares moved down 2.9 percent to 134 kroons on trade of 26.1 million kroons. "To look at it in the long term, such a fall cannot be regarded as justified at all," Kangus said.

Most analysts believe that Eesti Telekom has tracked general weakness in the sector as shares of Western European telecommunications sector companies have fallen by an average of 5 percent over the week. Kangus also said the fall in price of Telekom was partly caused by changes in the exchange rate of the dollar. "To look at the new tariffs [of Telekom and its competitors] that have now been published, I could say that the share is sold down emotionally rather than on a fundamentally justified level," Kangus said.

Brewer Saku Olletehas released somewhat weaker financial results than expected. Kangus pointed out that the market reacted negatively to the news by pulling down the share price. Saku lost 1.8 percent and closed at 59 kroons.

EVP privatization vouchers stabilized somewhat after a fast fall the previous week. "There shouldn't be any sharp movements either way in the next period," Kangus forecast. "A couple of percent here or there is the forecast for the next week." Kangus said that latecomers who decided to make their privatization payments had a certain effect on EVPs' demand in the last few days.

Kangus said that the week was characterized also by the takeover of Fakto stock by Leho Siimsen, which is bound to lead to the delisting of Fakto.

The week's total bourse turnover was 75.4 million kroons.

Latvia: Nordic Food's Halvardson, Staburadze, keep investors guessing

Most stocks continued on a downward slide in Latvia, with trading activity slow during the outgoing week. Dow Jones Riga Stock Exchange capitalization index (DJRSE) was off 0.6 percent to 142.91, and the price index RICI dropped 3.6 percent to 178.75. Bourse turnover was around 1 million lats ($1.6 million) with most of it, 57 percent, representing Latvijas Kraj-banka's over-the-counter sale of its 14.4 percent ownership in Staburadze sweets maker to an individual closely linked with Staburadze's current owners.

Apart from this deal with Staburadze's shares, trading in other stocks totaled just 430,000 lats, an incredibly small turnover even by Latvian standards, and almost all of it made up by Latvian Baltic List stocks. Shares in Latvijas Gaze gas company were traded most actively and closed at 3.57 lats Friday, up by 0.5 percent from the week before, with turnover of 182,000 lats. Most analysts believe that Latvijas Gaze share price and turnover will remain at current levels until the Dec. 18 auction to sell 2 percent of the gas company's shares is completed.

Latvijas Unibanka's shares remained stable at 2.05 lats throughout the week on a turnover of 80,000 lats. Obviously, Scandinavian SEB group continues to buy up the last remaining privately held shares.

Last week shares in Balta insurance company lost 4.1 percent to 3.5 lats on a turnover of 56,000 lats. Balta's share price is strongly affected by reports about the alleged success or, to the contrary, failure in its talks about selling a controlling stake in Balta to Danish insurer Codan. Lietuvos Draudimas, an acquisition by Codan in Lithuania, last week released a statement about joining forces with Vilniaus Bankas, creating speculation about a similar pattern in Latvia, with possible cooperation between Balta and Latvijas Unibanka as well.

Ventspils Nafta oil terminal's shares skidded 2.3 percent to 0.85 lats on a turnover of 37,000 lats, but there is no clear reason for a decline in price as the company is successfully meeting its oil reloading forecasts.

Among other developments, sharp declines in two official list stocks should be noted. Rezeknes Piena Konservu Kombinats milk cannery's shares plummeted 33 percent to 0.04 lats over reports suggesting that the company's loss for 2000 is likely to reach 1.5 million lats. Transport fleet company Rigas Transporta Flote suffered a loss of 22 percent to 0.07 lats over the position taken by the company's management about the need to delist the fleet's shares, and its likely effect on small shareholders.

Although the Riga Stock Exchange resolved to resume trading with Staburadze's shares as of Dec. 4, many analysts and investors find it difficult to put a value on the company. Despite Staburadze having finally made public the price of the deal (8 million U.S. dollars) under which the company acquired a controlling stake in another sweets producer, Laima, there still remains much uncertainty as regards Staburadze's own situation.

For now it cannot be ruled out that holders of a combined 57 percent stake in Staburadze, comprising Nordic Food company and Nordic Food's shareholder Trigvi Halvardson, who recently bought additional Staburadze's shares from disgruntled shareholder Latvijas Krajbanka, will be required to announce a buy-out offer for all remaining Staburadze's shares held by minority shareholders. This will happen if the Securities Market Commission establishes that Nordic Food and Trigvi Halvardson are linked with each other. They will then be required to follow the statutory procedure and announce a public buy-out offer for shares in Staburadze. This is the same procedure we just saw completed with SEB's buyout of Latvia's Unibanka and Lithuania's Vilniaus Bankas.

In addition, there has been no public disclosure as of yet explaining the structure of the deal, of loan or financing terms taken, or to be taken, by Staburadze to pay for this controlling stake in Laima. All of the above factors should have a very strong impact on Staburadze's share price, therefore it can be presumed that trading in the sweets maker's stock, when resumed, will be of an outright speculative nature, and the price is likely to experience sudden fluctuations in either direction.

Staburadze's management team, including its Nordic Food executives, leading a publicly listed company, has proceeded in an unacceptable manner in its buyout dealings, and it is perfectly reasonable that the Securities Market Commission officials stop trading in Staburadze shares until all relevant information about the buyout, by all involved parties, is made public. Keeping minority shareholders in the shadows through secrecy and non-transparency, after announ-cement of a merger, nullifies all intentions of the stock exchange to provide a fair and level platform in which investors can put their money, and trust.

Lithuania: Telecom surprises with rate hike

Trading was rather volatile on the Lithuanian stock exchange, with focus shifting from one issue to another throughout the week, though in general investor activity was subdued. The continuously tracked price index Litin-10 firmed 0.8 percent to 1112.55, the Official List index Litin was off 0.05 percent at 449.27, and the secondary Current List index Litin-A inched up 0.1 percent to 1159.52. The euro index of five Lithuanian Baltic List stocks was up 1.9 percent to 131.34, mostly due to upward movements by Kalnapilis and Rokiskio Suris stocks.

Blue-chip Lietuvos Telekomas continued to lead trade in terms of turnover, ending the week 1.9 percent lower at 2.05 litas ($0.5125) on 3.15 million litas turnover. "Sur-prisingly, selling interest in Telekomas shares remains quite strong, despite the news that the company is going to raise local call rates, which will boost its revenues," Suprema broker Arvydas Jacikevicius said.

Telekomas unveiled á new pricing plan, including an increase in rates for local calls from 0.09 litas to 0.12 litas per minute during peak hours in early 2001. Vytautas Plunksnis, an analyst with Jusu Tarpininkas, said the announced hike was rather unexpected. Telekomas also plans to scrap an hour of free local calls, now offered to the population monthly. This move alone should bring in around 90 million litas in extra revenues to the company, Plunksnis said. "The company`s revenues will grow markedly, but Lietuvos Telekomas` image will be damaged again, which may trigger a wave of various protests directed against the company," he added.

Refrigerator producer Snaige, up 2.2 percent to 30.01 litas, posted an active turnover of 854,600 litas, but most of that came as a result of what Hansabanka's broker Tomas Andrejauskas said was a one-off pickup in activity on Tuesday, Nov. 28. Vilniaus Bankas ended the week 2.0 percent higher at 50.00 litas, the price paid by SwedenÔs SEB during its recent buyout of the bank. Few doubt that SEB continues to buy Vilniaus Bankas shares after raising its shareholding to 97.9 percent through the buyout offer.

Brewer Kalnapilis charged ahead by 8.7 percent to 3.60 litas on 14,500 litas turnover, and cheese maker Rokiskio Suris jumped 7.6 percent to 22.50 litas with just 4,000 litas worth of shares traded. Oil concern Mazeikiu Nafta held steady at 0.84 litas on 120,700 litas turnover, and shipper LISCO ended the week 10.8 percent lower at 1.56 litas amid 59,600 litas turnover, driven down by ThursdayÔs news that the Dutch firm B.B. Bredo B.V. was unlikely to buy from the state a 75 percent stake in the shipping company. Arunas Rascius, an analyst with Jusu Tarpininkas, said, however, that the failure of the deal had been widely expected and should not lead to a collapse in LISCOÔs share price.

The bourseÔs overall equity turnover for the week reached 7.01 million litas.