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Share prices on the Tallinn bourse slid relentlessly the entire week, depressed by Brazil's decision to devalue its currency, the real, a decision blamed for triggering a plunge in major equity markets worldwide.
The TALSE index shed 6.12 percent during the week to close at 91.34 on Friday.
Sten Sumberg from Talinvest Suprema cited banks' anticipated poor results for December together with the Brazilian financial crisis, which is making investors more cautious, as the reasons for the market's performance.
The Brazilian crisis is causing panic with regard not only to emerging markets, but to established markets as well. "All eyes are on the U.S. stock market, Brazil being one of the United States' leading trade partners," Sumberg said.
It is very much feared that economic growth in the United States, which has thus far infused investors with high hopes, may slow down as purchasing power shrinks, he added. However, Stumberg seems to be somewhat optimistic about the future. "Generally the situation is believed to be better than in last fall's southeast Asian crisis," he noted.
The Helsinki bourse mid-week reacted with a steep drop of 7 percent. The plunge in Hansapank and Uhispank served as an indicator for the Tallinn market.
Hansapank ended the week at 50 kroons ($3.75), down 8.26 percent from the previous week. Uhispank shed 7.56 percent during the week to close at 20.80 kroons. Norma finished at 12 kroons, down by 5.51 percent against last week. Optiva Bank, which Friday posted a loss of 255.9 million kroons for last year, ended at 7.05.
While the prevailing market trend was down, the less liquid shares in Eesti Naitused, Kulmhoone, EMV, Leks Kindlustus, and Baltika, as well as the EVP privatization vouchers, ended the week higher. The price of the privatization vouchers was supported by the Compensation Fund's announcement of planned new bond issues.
Latvia: Unpleasant surprises continue in a weak market
Last week set a record for the amount of bad news released — from both issuers and brokers. Nevertheless, neither bad news at home nor shocks on the world markets seem to phase thick-skinned traders here, as no significant changes in prices were recorded on the Riga Stock Exchange. The DJRSE and RICI price indexes were stable, staying within a 1 percent range. Average daily turnover, however, nearly doubled from the previous week but was still worryingly low at 83,000 lats ($145,600).
Valmiera Fiberglass' shares took the spotlight. Interest was created by the company's shareholders decision on Jan. 8 to cancel unplaced shares, a move which increases the value of existing shares since future earnings-per-share figures will not be subject to dilution by these additional unplaced shares. The company's share price rose somewhat at the start of the week but later fell back to finish at 0.42 lats. Speculators had already pushed up the Valmiera Fiberglass' share price by 14 percent the previous week.
Staburadze's share price rose 7.5 percent. Staburadze and Valmiera Fiberglass are the only companies on the RSE to have announced significant dividend payments for 1998.
Financial companies are not in such a good shape. Unibanka's share turnover was the third most active as investors waited for the announcement of preliminary 1998 results.
And the result was considerably worse than expected. Losses in 1998 totaled 8.7 million lats. The size of the losses is perhaps not the worst aspect of the announcement, but that it may lead to a loss of investors' confidence in the bank.
Nine month results show Unibanka announcing a 1.7 million lats profit, with management claiming this figure includes provisions for all necessary reserves and accounts for all taxes.
Last November, after heavy pressure from the central bank, Unibanka's management announced a 5 million lat operating loss for the previous 10 month period. At that time, bank management once again reassured investors that Russian investments had been fully provisioned. However, on January 15, Unibanka said its losses had swelled to 8.7 million lats - again due to Russian investments. The most likely explanation for this more recent disclosure is that Unibanka's management and its new strategic investor - Skandinavska Enskilda Banken - decided to turn a new leaf and make full provisions for potential problem areas, cleaning up the balance sheet for a fresh start in the new year.
Whether investors continue to believe in Unibanka's management will quickly become clear when the Latvian Privatization Agency tries to privatize the 2.17 million shares in the bank that the state still owns. Publication of such poor results will no doubt lead to a pounding of the bank's share price. This will likely drag down other financial companies with it, especially Balta and Riga Komercbanka, both of which have significant Russian investments. Liquidity in both company's shares has already dropped, with most trades now being direct deals.
Lithuania: Hermis and Ukio lead bourse upwards
Last week brought the bulls out of hiding on the Lithuanian National Stock Exchange, driving up share prices of Hermis and Ukio banks, together commanding 45 percent of trading turnover.
The Litin index rose 4.84 percent to 535.92 points and the LitinA was up 2.4 percent, finishing at 1160.36.
Hermis' share price soared by 28 percent to 106.78 litas ($26.70) on a turnover of 9.3 million litas. Brokers attribute the rally to the results of the auction of the state's remaining 1.76 percent stake in Hermis on Monday for 94.10 litas per share.
Hansabank Markets broker Aivaras Abromavicius said that the high auction price meant the bank's market price should rise, but its future movement will depend on 1998 results and the liquidity of the shares.
The leap in Ukio Bank's shares, which trade on the current list, was phenomenal. Its share price rocketed up by 65.16 percent to 7.68 litas on a turnover of more than 1.70 million litas. Its share price has tripled in just over a month. According to the Baltic News Service agency's unofficial information a large portion of the bank's shares was recently acquired by an unnamed Greek company, and other potential investors are on the sidelines anxiously awaiting publication of 1998 results.
Trading in Vilnius Bank's shares was more subdued than usual, and after little movement all week its share price finished up 0.79 percent at 26.82 litas. Litimpeks Bank market specialist Vincas Vanags said minor fluctuations are to be expected as there is no news to drive its share price solidly in either direction.
Rokiskio Cheese's shares surged up by 9.69 percent to 18 litas on a turnover of 267,000 litas.
Trading of LISCO's shares on the current list was quite active with a turnover of 574,000 litas. The shipping company's share price jumped 17.3 percent to 2.78 litas.te has stepped up its supervision of trading in such a sluggish market, and lodged accusations against one of the main brokers - Trasta Kombercbanka. Bad news for the brokers, though, is sure to bring good news to investors, who should be applauding greater supervision and transparency in the market.
The decision of Uhispank, Unibanka and Vilnius Bank to stop competing against each other will likely lead to a consolidation of players in the Latvian market. Vilnius Bank's VB Financial Markets in Latvia is the likely first victim of this policy, and the fate of Tallinna Pank Securities Latvia, owned by Uhispank, is not clear.