Price gains by Estonian and Lithuanian telecom stocks boosted the Baltic List capitalization by 2 percent to 2.5 billion euros ($2.2 billion) as of April 13. Total Baltic List turnover was 5.22 million euros, as compared with 3.75 million euros in the preceding week. Estonian stocks contributed 62 percent of the turnover, Lithuanian stocks 35 percent and Latvian stocks only 3 percent. Baltic List stocks led on the Estonian market last week, accounting for over 90 percent of the total turnover on the local bourse, while in Latvia and Lithuania this figure was closer to 50 percent.
Estonia: Broad strength reflects renewed optimism
Last week was a relatively good one for the Estonian stock market, first of all due to positive trends on the world markets. The TALSE index posted a gain of 3.4 percent for the week, ending at 127.86. The euro price index of the six Estonian Baltic List shares was up just 0.4 percent, closing at 121.52, as illiquid Tallinna Kaubamaja shares suffered a sharp decline. The aggregate bourse's turnover, generated in 448 transactions, was 56.4 million kroons ($3.20 million).
"Hansapank, Telekom and Norma were on an upward course, reflecting more the shares' true value," Hansabank Markets broker Romet Tepper observed. The biggest leap, 8.4 percent, was recorded by Estonian Telekom, which finished at 71 kroons amid trade worth 16.5 million kroons.
Hansapank, the most traded security with 26.4 million kroons in turnover, closed 1.1 percent higher at 136 kroons. "Whereas Telekom is mostly traded by local investors, it's the major institutional investors who make deals in Hansapank shares," the broker said. The major event of the week, that of Hansapank's offer for the Lithuanian savings bank Lietuvos Taupomasis Bankas being approved, was good news, Tepper said. "Now it remains to await the price," he added. "Investors are optimistic about Hansapank."
Most likely this optimism will be further supported by the news that Hansapank's directors paid a special visit last week to the United States to meet with major investors in Boston and New York. Hansapank leaders are also planning to visit major European investors, probably in May. Other good news for Hansapank is that Lithuania's central bank decided not to apply sanctions on the Estonian bank's subsidiary, Hansabankas, for violations of the law on the prevention of money laundering. According to the press, it was reported that Hansabankas' managers had failed to notify law enforcement officials about suspicious financial dealings covering approximately two thousand transactions. A bank must notify the tax police department for all transactions worth 50,000 litas ($12,500) or more. The bank's managers have denied all charges, conveniently attributing the mess to malfunctions in the software program used by the bank.
Norma climbed 6.1 percent to 50 kroons in deals worth 6.92 million kroons. "The next week is not likely to bring a similar recovery on the bourse; we'll be continuing on a moderately optimistic course," the broker predicted. He said optimism should persist as long as no negative events surface.
Cautious optimism over the future of the Tallinn bourse is based also on prospects of its union with the Helsinki Exchanges Group (HEX), which raises the possibility that foreign investors will take notice of small and medium sized companies in Estonia. "We ourselves hope that by expanding the 'domestic market' to Finland, we'll be able to draw attention also to companies which, while relatively small on the European scale, are pretty well known brands here," Tallinn Stock Exchange's chairman of the board, Gert Tiivas, said. He named Tallinna Kaubamaja, the brewery Saku Olletehas and Viisnurk as companies that could fit into a Finnish small investor's portfolio.
HEX's acquisition of a majority stake in the TSE will, in Tiivas' opinion, also increase the possibility of new firms being listed on the bourse. After the acquisition of state-owned shares in the TSE, HEX will have a 56.8 percent holding in the Tallinn bourse, and the purchase of a part of the Bank of Estonia's shares will bring HEX's stake to roughly 60 percent.
Latvia: More declines at record low prices
Contrary to trends on the stocks exchanges of neighboring countries, Latvia last week saw a major decline in a number of stocks, including the oil terminal Ventspils Nafta. The Riga Stock Exchange price index RICI fell 3.7 percent to 147.58, another low going back several years. Dow Jones Riga Stock Exchange capitalization index also moved down, dropping 3.6 percent to 130.8. The euro price index of the three Latvian Baltic List stocks, which usually tracks the movement of the DJRSE index, slipped 2.2 percent to 156.75. The turnover of stocks on the stock exchange, as in the previous week, was just 156,400 lats ($247,900). Sales of government debt securities worth 1.43 million lats added to trading volume on the Riga Stock Exchange.
The key development last week was the decline of shares in Ventspils Nafta, which sank 7.9 percent to 0.58 lats on a turnover of 18,000 lats. The decline was due to several negative news stories coming out at the same time. First was the ongoing "slander" campaign in the press against Ventspils Nafta by Haim Kogan, the Latvian representative of Russia's LUKoil. The Russian newspaper Vedomosti on April 12 quoted the Lukoil-Baltija-R director general as threatening that "now, when the Baltic pipeline system construction proceeds with full force, Ventspils is losing value at a disastrous rate. It will be left without oil soon. In that case, however, they will be able to increase handling of oil products." According to Kogan, this was the reason why LUKoil, which one and a half years ago regarded the acquisition of the Latvian oil terminal on the Baltic Sea coast as a profitable deal, now did not see any point in following through.
Other bad news for Ventspils Nafta came from Lithuania, where the Latvian oil terminal's competitors are based. The same Vedomosti reported April 12 on the successful negotiations between the Lithuanian oil terminal Klaipedos Nafta and the Russian oil company Slavneft on cooperation and a possible sale of some holdings in the Lithuanian company to Slavneft.
Moreover, another report last week stated that Russia's LUKoil intends to resume talks with Lithuania's Mazeikiu Nafta about buying part of the shares in the Lithuanian concern. LUKoil's position in Lithuania is still quite strong as its supporters include Lithuanian Prime Minister Rolandas Paksas himself. Latvijas Unibanka's market analysts believe that Ventspils Nafta shareholders may also be disappointed over the general stagnation of the Latvian stock market and continued uncertainty concerning privatization of the remaining state holdings in the oil terminal.
Latvijas Gaze shares skidded 2.9 percent to 3.59 lats on a turnover of 63,000 lats, and shares in the distillery Latvijas Balzams also dropped 2.9 percent, to 0.33 lats. Low-liquidity stocks including the motor chain producer Daugavpils PKR and the metallurgy firm Liepajas ML also posted significant losses, with the former plummeting 11.1 percent to 0.08 lats and the latter falling 18.8 percent to 0.13 lats. These prices are record lows for both companies and, to a great extent, were a major factor in the downward movement of the Riga Stock Exchange price index.
Lithuania: Danes close in on another acquisition
Shares in LISCO stole the spotlight on the Lithuanian stock exchange, reaching a new high towards the end of the week on the news that a deal over its possible sale to the Danish shipping company DFDS Tor Line might be close to signing. The bourse's continuously tracked price index Litin-10 firmed 3 percent to 1,178.38, the blue chip official list index Litin was up 0.6 percent to 412.48, and the broad index Litin-G rose by 1 percent to 1,004.54. The euro price index of the six Lithuanian Baltic List shares remained almost unchanged for the week, closing up 0.1 percent at 125.33 as gainers balanced losers. Equity turnover on the bourse reached 13.84 million litas ($3.46 million). Overall turnover for the week, including T-bill trades, reached 25.38 million litas.
Market participants said the upcoming completion of LISCO's privatization process made the stock extremely attractive to speculators, with interest in other stocks pushed into the background. Trading in LISCO shares accounted for 30 percent of the total central market turnover. Listed on the current list, LISCO rose 6.8 percent to 3.91 litas, its highest level in 52 weeks, in trade worth 1.07 million litas.
On the official list, Lietuvos Telekomas ended the week 1.6 percent higher at 1.90 litas on a turnover of 523,300 litas. Another 5.61 million litas' worth of shares in the fixed-line telephone monopoly changed hands in block trades. Cheese maker Rokiskio Suris slid 2.9 percent to 18.25 litas in trade worth 118,800 litas, and the TV-tube maker Ekranas was down 1.2 percent to 7.70 litas with 81,000 litas' worth of shares traded.
Refrigerator producer Snaige climbed 4 percent to 35.90 litas on a turnover of 40,000 litas. Brokers attributed the rise in Snaige's share price to a recent statement by the company's managers that a majority interest in the company might be sold to a strategic investor within three months. Amid low trading volumes, the brewer Kalnapilis fell 3.1 percent to 4.35 litas, and the knitwear producer Utenos Trikotazas skidded 6.2 percent to 3 litas.
Back on the current list, the dairy producer Pieno Zvaigzdes ended the week 13.7 percent higher at 1.67 litas in trade worth 188,900 litas. Driven by reports that Pieno Zvaigzdes intends to use funds raised through its new share issue to buy a majority stake in Panevezio Pienas, shares in the latter dairy company charged ahead by 14.7 percent to 1.95 litas, with a modest turnover of 10,200 litas.
Electronic component maker Vilniaus Vingis shot up 7.6 percent to 5.60 litas on a turnover of 177,700 litas. Another 5.08 million litas' worth of shares in the company traded in block deals. Vilniaus Vingis' share price surged following the weekend announcement that the company's board recommended lowering the face value of the company's shares from 5 litas to 4 litas, with the resulting funds, approximately 9.12 million litas, to be paid back to shareholders. What this signals to the market is that, in returning capital to shareholders by paying them a 20 percent dividend, based on the share's face value, company management has failed in its ability to identify and invest this money in attractive, high growth potential projects. Vilniaus Vingis' shareholders are expected to vote on this proposed capital reduction plan on May 19. Perhaps shareholders should instead be voting to replace top management.
Dairy Zemaitijos Pienas was up 2.4 percent to 8.40 litas on a turnover of 118,500 litas, and the savings bank Taupomasis Bankas weakened 0.4 percent to 9.05 litas with 119,800 litas' worth of shares traded.