Out of 15 Latvian, Lithuanian and Estonian blue chips included on the Baltic List, six fell and eight moved up, while Estonia's retail chain Tallinna Kaubamaja was unchanged. As a result of the significant loss suffered by highly-capitalized Eesti Telekom, the Baltic List capitalization dropped 4.1 percent to 2.7 billion euros ($2.3 billion). At the same time, large deals in Eesti Telekom shares ensured a high weekly overall turnover for the Baltic List, reaching 18 million euros, double the level of the previous week.
Estonian stocks contributed 92 percent of the total weekly turnover, Latvian stocks 7 percent and Lithuanian stocks 1 percent. As usual, Baltic List stocks were the absolute volume leaders on their respective national stock exchanges. They accounted for over 98 percent of the total turnover on the Estonian exchange. In Latvia and Lithuania this figure was approximately 30 percent to 40 percent for each.
Estonia: Telekom victim of income tax speculators
Shares in Eesti Telekom saw brisk trading as dividend expectations set the tone on the Tallinn Stock Exchange. Over the week, the TALSE index fell 2.9 percent, to 145.44, with Telekom contributing heavily to the decline. The price euro index of the six Estonian Baltic List shares also fell, by 1.3 percent, to 127.62. The weekly turnover was quite encouraging, worth 261.8 million kroons ($14.2 million), in 888 deals.
Telekom alone was responsible for the lion's share of the turnover, generating 203 million kroons, or 77 percent, of total turnover. The stock fell 14.2 percent to 75 kroons.
Tremendous trading activity in Telekom shares can be clearly explained by the peculiarity of the Estonian taxation system, as dividends here are treated as tax-free income to residents. May 31, which also marked the stock exchange's 5th anniversary, was the last cum-dividend day, with shares bought after this date no longer entitled to dividends. The following day, June 1, saw dividend-free Telekom shares fall 8.23 kroons, or 9.9 percent, which can be regarded as far beyond the fair ex dividend discount amount, expected to have been between 5 kroons and 5.50 kroons. The benefits of Estonia's tax regime, which taxes company earnings only once, at the corporate level, rather than twice through additionally taxing dividends at the individual level, have been lost on short-term traders trying to avoid taxes through dividend receipts, who inadvertently sold the stock to below its fair market ex dividend value.
At the same time, brokers don't believe that Telekom's drop will initiate a long-term reversing of current market trends. "There was a stabilization of levels, and shares in Telekom weakened a little in its course," Uhispank capital markets strategist Aivo Kangus told BNS, in characterizing the trading week. Kangus said that the fall in Telekom's price was caused by the negative sentiment concerning world markets and by larger than expected sales of the shares after the dividends were secured. "I'd expect the levels to stabilize next week, not to move down," Kangus said.
Shares in Hansapank climbed 0.7 percent to 160 kroons on trade of 43.65 million kroons. On June 1, the share broke through the 160 kroons line, briefly hitting the 160.50 kroon level. "The price of Hansapank stock should hold, as there is no quick movement in sight for key shares," Kangus forecast.
Shares in the brewer Saku Olletheas fell 6.3 percent to 59 kroons on 1.02 million kroons of turnover. "In Saku's case it was an expected reaction to weaker economic results, supported by the lowering of price targets by other players on the market," Kangus said.
Shares in Norma closed 1.8 percent off, at 48.10 kroons, on 7.45 million kroons of turnover.
Latvia: Court ruling makes mockery of shareholder rights
The key event on the Latvian stock market last week was a decision by a Riga district court, which ruled in favor of the controlling stakeholder in the pastry-maker Staburadze, reversing the stock market commission's resolution requiring him to carry through with the obligatory public buy-out offer to the remaining minority shareholders in the company. In practice, this court ruling has inflicted irreparable damage on the Latvian stock market, as it has actually admitted that Latvian regulatory agencies have no mechanisms for protecting the rights of minority shareholders in public companies.
On June 1 the market responded to the news with a sharp decline in Staburadze's shares, which had previously been climbing steadily throughout the week. Meanwhile, almost all brokers and stock market specialists agreed on the need for the stock market commission to appeal the district court decision to a higher court.
Latvian stock exchange indexes traveled in diverging directions. The Dow Jones Riga Stock Exchange capitalization index was off 0.14 percent to 138.59, while the price index RICI jumped 5.5 percent to 161.31. The price euro index of the three Latvian stocks included on the Baltic List was up 0.8 percent to a new all-time high of 172.28, boosted by the falling euro exchange rate against the lat. Total stock market turnover on the Riga Stock Exchange was 1.82 million lats ($2.85 million). Shares in the fiberglass company Valmieras SS accounted for 1.07 million lats, or most of this turnover, climbing 4.2 percent to 0.5 lats on the news that the company's first-quarter profit figures topped its earlier profit estimates.
Ventspils Nafta saw active trading, but its share price dropped 3.2 percent to 0.6 lats. Further declines seem unlikely, however, as the quantity of oil handled by the oil terminal keeps rising. The gas company Latvijas Gaze inched up 0.2 percent, reaching its historical peak of 3.86 lats per share; the insurance company Balta was up 0.6 percent to 4.48 lats, approaching the public buyout price of 4.50 lats offered by the Danish insurance group Codan to minority shareholders.
Lithuania: Market activity at a standstill
Trading was slow on the Lithuanian stock exchange in the outgoing week as the market remained locked in its early summer doldrums. Most shares were losing ground, under duress of low activity and lack of investor interest. The bourse's benchmark price index Litin-10 was off 1 percent to 1,042.17, the blue chip official list index Litin slid 2.1 percent to 375.46, and the broad index Litin-G dropped 0.9 percent to 927.55. The price euro index of the six Lithuanian Baltic List stocks was up 1.8 percent, closing at 123.83. The index was propelled by a weak eurocurrency exchange rate against the litas.
The bourse's equity turnover came to just 2.11 million litas ($527,500). The bourse's overall turnover reached 17.97 million litas, of which 15.85 million litas were generated through T-bill trading.
On the central market, shares in the blue chip Lietuvos Telekomas and the cheese maker Rokiskio Suris were the focus of trading. Telekomas skidded 3.8 percent to 1.73 litas amid a 249,900 litas turnover; Rokiskio Suris ticked up 0.06 percent to 18 litas on a turnover of 220,100 litas. Refrigerator maker Snaige slid 1.4 percent to 35.00 litas in trade worth 119,700 litas.
Other stocks on the official list attracted even less investor interest. The brewer Kalnapilis was stable at 4.15 litas with 23,600 litas' worth of shares traded; the TV-tube maker Ekranas soared 9.5 percent to 6.30 litas amid a 18,700 litas turnover. However, Ekranas remains 25 percent below its March 30 price, the date it made its official debut on the Lithuanian bourse's official list and the Baltic index. The knitwear producer Utenos Trikotazas held steady at 3 litas in trade worth just 10,800 litas.
On the current list, the oil company Mazeikiu Nafta slid 3.1 percent to 0.61 litas, with 153,800 litas' worth of shares traded, as investors continue to be burdened with worries over financial performance and uncertainties of a possible change in ownership structure. The electronic component maker Vilniaus Vingis slid 3 percent to 4.70 litas on a turnover of 73,000 litas. The dairy Zemaitijos Pienas bucked the trend by rocketing up by 16.6 percent to 10.50 litas. Also, as in the case of Ekranas, the turnover was rather limited at 9,300 litas. In block trading, 146,000 litas' worth of shares in the oil terminal Klaipedos Nafta, and 119,600 litas' worth of shares in Siauliu Bankas changed hands.