Stock markets: weekly report (November 3 - 9)

  • 1998-11-12
Banking shares still remain the most interesting assets for speculation in the Baltic stock markets, however rumors about a possible merger between Latvia's Unibanka, Estonia's Uhispank and Lithaunia's Vilniaus bank remain just rumors.

Questions also remain about a possible new strategic investor for one of these banks or all of them. Two potential candidates, Nomura International and Svenska Handelsbanken, are heavily exposed in emerging markets. If they want to buy a Baltic bank they will try to pay as little as possible.

If so, the new dispute between Uhispank and the Compensation Fund, which could result in heavy losses for Uhispank, may help foreigners to decrease Uhispank's price substantially .

Also Unibanka, which recently received a slap from the Central Bank for reserves shortages, may find itself to be more "flexible" in negotiations with strategic investors.

Considering all the above, the best strategy for the Baltic banks may be to take at least a short pause in their "external" activities. So, Uhispank's decision last week not to speed up merger negotiations with Vilniaus bank and Unibanka seems to be the right option.

Latvia: Profit-taking should not affect rise

Forecast trading on the Riga Stock Exchange picked up considerably last week with its turnover jumping 130 percent to one million lats ($1.75 million).

The RSE's indexes were up between 2 percent and 4 percent, and would have been higher had it not been for some profit-taking. The Dow Jones RSE ended the week up 2.81 percent at 90.83 points and the RICI was up 4.24 percent ending at 157.82 points.

The RSE keeps getting more divided between liquid and illiquid stocks. Three companies - Unibanka, Balta and Ventspils Nafta - accounted for 90 percent of turnover. Moreover, Balta's shares were mostly traded in direct deals.

Share trading in Riga Transport Fleet, Daugvapils Drive Chain Factory and Valmiera Fiberglass topped 15,000 lats. Interest in their shares was driven by good news about the companies. Daugvapils PKR announced it had resumed production of drive chains and exports to Russia. Valmiera Fiberglass announced it would break ground on a new production facility in December.

Last week shares in Unibanka climbed 2.25 percent to 0.91 lats. The small rise was due to the bank's announcement it may review its profit target for the year once again. In addition the bank plans to reply to the Bank of Latvia's finding that it should form larger reserves. If Unibanka manages to convince the central bank it does not need to form larger reserves, it will not need to revise its profit target and its share price will likely rise.

Interest in Unibanka's shares is currently speculative. In addition to news from the central bank, speculators are also waiting for word about potential foreign investors. Interest in Unibanka's shares is similar to that in Vilnius Bank's and Uhispank's, the potential partners in a Pan-Baltic bank. This interest opens up some good ground for speculators.

Compared to Unibanka, interest in Ventspils Nafta is likely more strategic in character. News about the inevitable rise in transit of Russian oil and the possible construction of a new pipeline gives hope that interest in the company's shares will be long-term. Ventspils Nafta's shares jumped 9.33 percent last week to 0.82 lats.

Last week Rigas Komercbanka and Olainfarm were the big losers. Komercbanka's shares plunged in the absence of any potential investor appearing on the horizon. Most investors believe the bank will not be able to continue to develop normally without additional capital.

The drop in Olainfarm's share price was also merited as there was no reason why it should be double that of its competitor Grindex. On the other hand, a ray of hope appeared for the company last week in the form of the possibility of 2 million lats from the government in compensation for the losses due to the Russian crisis.

Grindex cannot hope for such assistance as its losses are mostly due to its Estonian subsidiary - Tallinn Pharmaceutical Factory.

Estonia: Speculators carry the market

Last week shares in Uhispank were the focus of attention, buoyed by the optimistic mood of speculators.

The TALSE Index ended the week up 2.38 percent at 98.5 points.

Talinvest Suprema Project Director Alvar Roosimaa said investors spent last week waiting for additional information from Uhispank about negotiations in its search for a strategic partner.

"Speculators were betting on both the rise and fall of the share," said Roosimaa. "The bank's stock price was kept high by the optimistic mood of speculators betting on a sudden rise in its price, which of course may not happen."

In a normal situation the news that the bank may end up in court over a 80 million kroon ($6 million) forward deal with the Compensation Fund would have done more damage to the bank's share price.

Roosimaa said that last week's announcement that the bank's board had received permission to search for a strategic partner was not enough news for investors and did not have a strong impact on trading.

"The mood everywhere was anticipation, investors wanted to hear more concrete information." he said.

Roosimaa said the market was struck by apathy and the few changes that took place were often purely technical.

Trading in Uhispank totaled 23.4 million kroons, 55.3 percent of the market's total turnover. Trading in Hansapank's shares totaled 5 million kroons and trading in Norma's shares came in third at 3 million kroons.

Norma's share price climbed 4.27 percent last week with the news of orders from Opel's Polish factory. Its average price before the weekend was 13.44 kroons.

Shares in Hansapank rose 3.09 percent while shares in Uhispank were up 0.04 percent.

On the additional list 45,000 shares in Pro Kapital changed hands for 2 million kroons, the share price sliding 4.08 percent to 47 kroons.

Last week the biggest change was in ASA Insurance, whose shares rocketed up 117.5 percent - from 2.74 kroons to 5.95 kroons on a turnover of 1.2 million kroons.

Lithuania: Trading has capricious character

Last week the short two-week rally on the Lithuanian National Stock Exchange broke with share prices falling and turnover dropping.

The rise in share prices, which lasted seven trading sessions, reached its peak on November 3 when the Litin index hit 455.

Brokers said the rise was fueled by rumors that Scandinavian banks had appeared on the market and were buying shares in Vilniaus and Hermis banks.

That Estonian Uhispank's brokerage Baltijos Vertybiniai Popieriai was doing the buying added credence to the rumor.

Vilniaus Bank's share price reached 22.34 litas and Hermis' 73.43 litas on Tuesday and then headed down after the rumors were not confirmed.

Despite the falling share prices the Litin ended the week in positive territory, up 2.89 percent from the week before at 431.67 points. The Litin A was down 2.42 percent at 1158 points.

On the central market trading in Vilniaus Bank's shares was the most active with 2.23 million litas ($557,500) in turnover. It was up 12.28 percent at 21.39 litas.

According to Suprema brokerage analysts interest in Vilniaus Bank's shares should not wane and its share price should go up.

Hermis did not have quite as good a run, down 6.22 percent on a turnover of 585,000 litas.

Rokiskio Suris' also enjoyed some demand. Its share price climbed 4.03 percent to 17.83 litas on a turnover of 484,000 litas.

After Snaige released good 10-month results, demand for its shares increased. It still ended the week off 0.62 percent at 19.15 litas.

Trading in current list shares was light on the central market with most deals done on the direct market. Over 5.7 million litas of shares in Litimpeks bank were sold. Shares in Panevezio pienas were also traded heavily with 1.9 million litas in deals. The dairy's shares are reportedly being bought by a foreign investor or Birzai dairy.

Trading on the bourse totaled 36.38 million litas, more than 60 percent of which was trading in T-bills.

Brokers predict the slide in share prices should stop soon and the prices of more liquid shares will begin to climb.Ê