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Baltic stocks on downward path

  • 2001-05-03
An absolute majority of the most liquid Baltic stocks went on a downward spiral in the outgoing week, bringing the Baltic index down 1.8 percent to 127.75. Losers outnumbered gainers eleven to four on the Baltic List, comprised of fifteen Latvian, Lithuanian and Estonian blue chip companies. While a few shares saw price increases of between 2 percent and 4 percent, Lithuania's Ekranas and Kalnapilis suffered substantial losses of 13 percent and 6 percent respectively.

Despite the falling price in Eesti Telekom, the Baltic List capitalization as of April 27 remained unchanged at 2.55 billion euros ($2.3 billion) due to gains posted by Lietuvas Telekomas, Hansapank and Latvijas Gaze. The aggregate capitalization of these three stocks exceeds that of Eesti Telekom. Total Baltic List turnover was 5.3 million euros, as compared to 18.45 million euros in the previous week. Estonian stocks contributed 84 percent of the list's weekly turnover while Latvian and Lithuanian stocks produced only 8 percent each. The Baltic List shares led the local Latvian and Estonian stock markets, bringing in over 60 percent of the total turnover on their respective home bourses, but in Lithuania this number was less than 20 percent.

Estonia: Strong 1Q results prevent market downturn

The Tallinn stock market took its cue in the outgoing week from the release of first quarter results by Eesti Telekom and Hansapank. The TALSE index edged down by a marginal 0.01 percent to 131.93. The price index of the six Estonian Baltic List stocks was off 1.6 percent to 120.57 as most share prices decreased, except for Hansapank and the seatbelt maker Norma. The total turnover in 488 deals was 75.2 million kroons ($4.3 million).

Hansapank's shares kept moving higher throughout the week, adding 1.8 percent to finish at 140 kroons, and was the most traded issue with a turnover of 33.9 million kroons. According to results released on April 27, the Hansapank group earned a net profit of 409.9 million kroons in the first quarter, as compared with analysts' forecasts of between 372 million and 390 million kroons. Trigon Markets trader Kaur Elviste believes echoes of the gains posted by Hansapanka last week are expected to continue next week as well, considering also the good news that Moody's last week confirmed Hansapank's financial strength rating at D+ following the bank's purchase of the Lithuanian savings bank Lietuvos Taupomasis Bankas. Additionally, Eesti Uhispank last week reiterated its "Low risk buy recommendation for Hansa stock with the year-end target price of 185 kroons," saying that Hansapank's profit for the first three months of the year was broadly in line with Uhispank analysts' expectations, both in terms of growth and profitability. Uhispank forecasts Hansapank's annual profit to total 1.54 billion kroons this year and 1.76 billion kroons in 2002. In other news about the bank, shareholders approved, at a general meeting held on April 26, the board's proposal to pay a dividend of 1 kroon per share.

Eesti Telekom's share lost 1.3 percent of its value to close at 75 kroons, with a turnover of 25.1 million kroons. "Despite ending in negative territory the share did better than Nasdaq and Central European telecoms," Elviste observed. Brokers suggested that Telekom's share was supported and boosted by news about dividends and its first quarter results.

On April 25 Eesti Telekom's supervisory board decided to offer a proposal to shareholders at next month's annual general meeting, which is, to pay a dividend of 5.5 kroons per share. On April 26 Eesti Telekom announced it had earned a net profit of 275 million kroons in the January to March period, a 12 percent rise over the same quarter last year.

Latvia: Indexes up for the week

All Latvian stock exchange indexes rose last week, with analysts noting also the increase in the number of deals made on the central market exchange. The Dow Jones Riga Stock Exchange capitalization index rose 1.9 percent to 134.96 and the price index RICI was up 0.5 percent to 152.19. The euro price index of the three Latvian stocks included in the Baltic List inched up 0.7 percent to 159.09. The weekly turnover of stocks on the bourse was 369,000 lats ($588,000). Last week the Riga Stock Exchange also saw 28.8 million lats in trade with bonds and debt securities.

Shares in the gas company Latvijas Gaze were the center of attention on the stock exchange, gaining 5 percent to 3.75 lats on a turnover of 211,000 lats, which accounted for 57 percent of the total stock market turnover. Trade in the gas company's shares has become more active recently due to the increased amount of news reported, but for now it is premature to say whether the upward trend will continue.

Although both Latvijas Gaze's management and shareholders lay great hopes on the government in finally making a decision about lifting most of the restrictions on gas rates, the issue is still unsettled. The Latvian electric utility Latvenergo already is forecasting a substantial rise in heating and electric power rates in case this gas rate increase materializes. Moreover, problems with privatization of the Latvian shipping company Latvijas Kugnieciba have made the government even more vulnerable politically. Under the given conditions, it will be increasingly difficult to adopt the unpopular, though correct, decision about raising the rates. One should not forget that Russia's Gazprom may soon sharply increase the price for gas supplied to Latvia. It is already old news that for Estonia the gas prices will be raised an average of 10 percent, which should lead to a substantial jump in the inflation rate.

Finally, Latvijas Gaze's future operations may be seriously affected by the new gas pipeline, Russia-Europe, which is to run along the bottom of the Baltic Sea, although development of the project has only just begun. For now, it is not clear whether there will be any place for Latvijas Gaze and its gas storage facility in Incukalns in the project involving Russian, Finnish and German gas and energy companies.

The distillery company Latvijas Balzams last week saw trading volume of 91,000 lats, staying flat at 0.35 lats per share. Market analysts believe that this trading activity has increased over ongoing talks about selling a controlling stake in the company.

Shares in the oil terminal Ventspils Nafta lost 2.2 percent, to 0.6 lats per share. Although the company earned a net profit of 13.3 million lats last year, meeting its target figure for 2000, investors view the long-term prospects of Ventspils Nafta with considerable uncertainty.

Lithuania: Markets down on privatization uncertainties

The Lithuanian Shipping Company (LISCO) led trade on the central market of the National Stock Exchange of Lithuania; its shares fell back as investors disapproved of the privatization agreement, signed on April 23. The bourse's benchmark price index Litin-10 edged down 0.8 percent to 1,103.74, the blue chip official list index Litin inched down 0.3 percent to 408.16, and the broad index Litin-G was off 0.1 percent to 986.89. The euro price index of the six Lithuanian Baltic List stocks was off 3.7 percent at 119.25, as Ekranas and Kalnapilis fell markedly over the week. The bourse's equity turnover came to 6.76 million litas ($1.69 million). The bourse's overall turnover came to 26.62 million litas, including 19.87 million litas generated in T-bill trading.

LISCO skidded 14 percent to 3.30 litas in trade worth 828,400 litas. It was dragged down by uncertainty as to whether the Danish company DFDS Tor Line, which signed an agreement to purchase 76.36 percent of shares from the state, would offer a minority buyout. Brokers said that LISCO lost ground because the signing of the agreement between the State Property Fund and DFDS Tor Line left investors with even more unanswered questions. Moreover, the Lithuanian president on April 27 vetoed the amendment on the Law on Public Trading of Securities. This amendment stipulated that investors who acquired more than 50 percent of a company's shares from the state must buy out the remaining shares at the same price. In the president's opinion, this provision should be applied only when it has been included in the program of privatization of state-owned property. The privatization program for LISCO does not provide for this requirement to announce a tender offer.

The savings bank Taupomasis Bankas entered final stage of privatization. Taupomasis Bankas' share price climbed 3.2 percent to 9.50 litas on a 173,100 litas turnover amid news that Estonia's Hansapank is going to offer to buy shares from small shareholders at the same price as from the state, equal to 9.88 litas each.

On the official list, blue chip Lietuvos Telekomas saw the most active trade. The blue chip stock edged up 1 percent to 1.91 litas amid a 503,100 litas turnover. Another 679,100 litas' worth of shares changed hands via block trades. Blue chips saw brisker trade at the end of the week. Analysts said that at the April 30 shareholders meeting, a decision was expected for approval of a dividend of 0.015 litas per one-litas face value share.

TV-tube producer Ekranas slumped 12.6 percent to 6.90 litas amid a 137,500 litas turnover. Brokers said the drop in Ekranas' prices could be attributed to the fact that the company would sell the five-litas face value shares at a price of 5 litas and that the existing shareholders of the company would not be granted pre-emption rights to acquire the shares from the new issue.

The brewer Kalnapilis slumped 5.7 percent to 4.10 litas with 61,100 litas' worth of shares traded; the cheese maker Rokiskio Suris held steady at 18.90 litas on a 31,200 litas turnover; the refrigerator maker Snaige held steady at 35 litas amid a 26,600 litas turnover; the knitwear manufacturer Utenos Trikotazas slid 1.6 percent to 2.95 litas in trade worth 5,700 litas. On the current list, the furniture maker Vilniaus Baldu Kombinatas climbed 1.9 percent to 4.65 litas with 223,100 litas' worth of shares traded; the electronic components maker Vilniaus Vingis skidded 5.6 percent to 5.30 litas amid a 104,200 litas turnover. In block trading, 2.92 million litas' worth of shares changed hands in the hardboard producer Grigiskes, and 393,700 litas' worth of shares moved in Siauliu Bankas.