The index of the Riga Stock Exchange posted the largest rise in the Baltics last year, gaining 59 percent. The Tallinn Stock Exchange went up by 10 percent, while the National Stock Exchange of Vilnius dropped by 13 percent.
"Although external imbalances produced an economic slowdown and deterioration in 1998 and 1999, the widely feared scenario of recession failed to materialize," said Veikko Maripuu, head of research at the investment bank Suprema.
Estonia's growth was mainly driven by external improvement, while Latvia relies on the fastest growing domestic demand. Lithuania's general economic improvement was clearly accomplished by the services sector.
"Based on these forces," said Maripuu, "I have both short- and long-term confidence in Estonian and Latvian economic development, while Lithuania should be able to show persistent long-term progress."
According to Maripuu, the Estonian market with its fundamental and market liquidity terms offers the best opportunities for portfolio investors in the Baltic countries.
"The Latvian economic situation is at least stable and should lead to better representation on our list, although the market clearly fails to have the appropriate depth and liquidity to meet the above criteria.
"Lithuania is the toughest solution, as it is the only Baltic country not improving at the required speed," said Maripuu.
What to buy next
In 2001, analysts from Suprema and Uhispank Markets have great expectations for the shares of such companies as Hansapank, Eesti Telekom and Lietuvos Telekomas.
"There is only one bank left on the market, Hansapank, that is becoming less of an Estonian bank. It is becoming international and its expansion is what makes it the winner of the year," said Maripuu.
Sven Kunsing, head of research at Uhispank Markets, also recommends buying Hansapank shares. He believes that the expansion into Latvia and Lithuania should have a positive effect on the share price, while positive results from Lithuania will affect the price in the year 2002 or 2003.
"For less adventurous investors, Hansapank will be the best choice, although it might not repeat last year's 40 percent rise," said Kunsing.
As the economic growth is also affecting the construction sector, Maripuu sees good growth opportunities in Merko. Merko, in a similar way to Hansapank, is expanding into Latvia and Lithuania. The declining Lithuanian market should turn into a stable rise this year.
Maripuu said that Estonian and Lithuanian telecom companies have great prospects if the world gets over the tensions that lie in this sector and starts looking at the companies' fundamental values. If the mobile communications sector does not improve in 2001, the prospects of the telecom sector in general may fail to improve at all.
Eesti Telekom should achieve additional value through its rapidly growing Internet usage and value-added services as well as the acquisition of data and media-related businesses. However, prospects for the short-term share price performance are somewhat affected by competitors' prices on fixed-line services starting from 2001.
Kunsing also considers the Estonian and Lithuanian telecom companies a good choice for the coming year. He said that Eesti Telekom is more attractive because the Estonian market is more active and unlike Lietuvos Telekomas it is dealing with a fast growing mobile network besides the fixed lines.
Eesti Telekom fell from its all- time high of 156 kroons ($9.4), that it gained in March 2000, by 45 percent, while Lietuvos Telekomas lost about a third of its value after its Initial Public Offering, which took place in June.
Maripuu recommends investing in such companies as the safety belt manufacturer Norma and the leading wood processing company Viisnurk.
Besides Hansapank and the telecom companies, Kunsing has great expectations for such Tallinn Stock Exchange main list companies as Norma, Merko and Kaubamaja, because they are the potential candidates for new acquisition offers.
Last year's winners and losers
Both Maripuu from Suprema and Kunsing from Uhispank agree that all three Baltic banks (Eesti Uhispank, Unibanka and Vilniaus Bankas), all of which have been taken over by Skandinaviska Enskilda Banken, were the winners of last year.
Kunsing said that although they were not the biggest winners in terms of share price growth, they described the opportunities hidden in the Baltic countries that local investors could not see. At the same time, Uhispank's financial results were not as high as expected last year.
According to Kunsing, analysts also underestimated the value of Reval Hotel Group, which received a 74 kroon takeover bid, although Uhispank's analysts suggested 50 kroons as a target price. Thanks to the acquisition the price increased by 114.5 percent last year.
The other big winners from last year were Tallinna Kaubamaja (+72 percent), Viisnurk (+129 percent), Merko (+120 percent) and Baltika (+116 percent), said Kunsing. Although Hansapank increased just 40 percent, it was a Ôsuper' good result with regard to its size. Hansapank was the most traded share on the Tallinn Stock Exchange, with its 2.1 billion kroon turnover. In Maripuu's opinion, the Tallinn Stock Exchange itself was the biggest loser in 2000. He said that the function of a market that lost seven companies last year is questionable. He called for clarification in the market before new stocks get on the list.
"At the same time it is unclear where the future of the Estonian market might be. Is it Tallinn, Helsinki, Stockholm or the virtual space?" asked Maripuu.