Trading activity, blue chips down on Baltic markets

Trading activity and prices of most of the blue chip stocks were down last week on all three Baltic states' bourses. This trend was attributed to the inactivity of local investors rather than to any hangover from the new financial crisis in South America, which has created turbulence on many of the emerging markets around the globe.

The Baltic index, as calculated in the euro currency, dropped 0.8 percent over the week to 128.85. Most other Baltic market indexes weakened as well. Losers swamped gainers 12 to three on the Baltic List of blue chips listed on the Riga, Vilnius and Tallinn bourses. Baltic List capitalization was down by 1.2 percent to 2.55 billion euros ($2.14 billion) as Eesti Telekom and Lietuvos Telekomas continued losing strength. The Baltic List turnover fell by almost half, to 2.4 million euros, amid very little buying interest from Western investors.

Estonian stocks accounted for 87 percent of the total list's turnover, Lithuanian 9 percent, and Latvian just 4 percent.

Baltic List stocks dominated trade on the Estonian and Latvian national stock exchanges, accounting for over 80 percent of market turnover. In Lithuania, this amounted to just 4 percent as a large part of the turnover there was from transactions in which Estonia's Hansapank was acquiring shares in Lietuvos Taupomasis Bankas, which are not registered on the Baltic List.

Estonia: No news to trade on

A dearth of news left traders regurgitating old stories, searching for clues to corporate developments, with little action to show on the Tallinn bourse last week. Hansapank accounted for half of the aggregate total turnover for the five days. The stock index TALSE slipped 0.8 percent to finish at 140.69. Calculated in euro prices, the index of six Estonian Baltic List shares was up 0.4 percent to 128.14. The turnover from the 344 deals of the week totaled just 38.3 million kroons ($2.1 million). "Stock prices remained practically unchanged over the week as no fresh news hit the market ," Hansabank Markets broker Romet Tepper said. "Even if markets in the West are moving, the activity does not reach us here," he added. Before leaving for the weekend, he added, "It's vacation time and local investors aren't doing anything much either."

Of the main list shares, Eesti Telekom and Hansapank ended the week slightly lower, while Norma posted modest gains. Telekom closed the week off 1.3 percent at 71.50 kroons amid 7.6 million kroons in turnover, while Hansapank fell 0.8 percent at 152 kroons amid 19.6 million kroons in turnover. Norma was 0.4 percent fatter at 49 kroons, and shares in the retailer Tallinna Kaubamaja moved 3 percent higher, closing at 68.5 kroons. "While local investors are waiting for Estonian stocks to fall further, prices of Hansapank, Telekom and Norma shares are already close to the bottom," Tepper said. "Next week will bring Estonian Telekom's results. Some forecasts are optimistic while others are pessimistic," the trader observed. "It would take a positive surprise to get Telekom moving," he explained. Telekom will release results on July 19.

Latvia: Investors wait for gas shares

Trading activity on the Riga Stock Exchange died out almost completely last week, as investors sat back awaiting the auction of a state-owned 2 percent stake in the gas company Latvijas Gaze, which is planned for July 19. Trading volumes were extremely low with prices of low liquidity shares falling significantly, effectively pulling down the RICI price index by 2.4 percent, to 147.16, close to the lowest level the index has hit during the last two years. The capitalization index DJRSE meanwhile stood almost unchanged due to stability in Latvijas Gaze's and the oil terminal Ventspils Nafta's share prices. The index rose just 0.2 percent over the week to 135.28.

The euro price index of the three Latvian stocks listed on the Baltic List was off by 0.8 percent to 151.39. Share turnover for the week on the Riga Stock Exchange was a mere 72,594 lats ($113,251) which is nearly two times lower than that recorded a week earlier. Meanwhile, over on the bond trading floor, the turnover in treasury bills and government bonds amounted to 2.5 million lats which, most likely, provides grounds for the bourse's management to predict good financial results for the year.

Nearly 75 percent of the bourse's activity, or 50,129 lats, was through transactions in Ventspils Nafta shares, which stood unchanged at 0.59 lats per share. Certain intrigue concerning these shares stems from the Latvian Privatization Agency's intention to amend privatization regulations for the rest of the state-owned shares in the oil terminal. These amendments are likely to draw objections from the oil transit company Latvijas Naftas Tranzits, the largest private shareholder in Ventspils Nafta.

In the meantime, news out of Lithuania that two Russian oil companies, TNK and YUKOS, are fighting for the rights to supply oil to the oil refinery Mazeikiai offers a certain optimism over Ventspils Nafta's fate. The competition between the Russian oil giants over control of supplies for Mazeikiu Nafta means that the Baltic destination will remain strategically important for the Russian oil business in the future.

Next week the main event on the Riga bourse will be the auction of Latvijas Gaze shares. Last week the shares rose by 0.5 percent to 4.07 lats amid just a 8,423 lats' turnover. The shares most likely will sell at between 3.85 lats and 4.15 lats, though the Latvian government for the time being is proceeding cautiously, predicting a price of 3.86 lats. In the future, Latvijas Gaze's share prices are expected to be influenced by progression of talks over setting up a uniform Baltic gas distribution network, one that would give the Baltic states the possibility over procuring gas supplies from neighboring Scandinavia. If such a decision is made, it will be for purely political reasons, aimed at reaching Baltic energy independence from Russia, as it is clear that Scandinavian gas will be much more expensive than Russian.

Other listed shares saw low turnovers tied to falling prices. Daugavpils Pievadkezu Rupnica motor chain factory plummeted 10 percent, to 0.09 lats. Staburadze confectionery lost 5.4 percent to 0.53 lats on the news that litigation between the exchange's supervisory body and the company's largest shareholder has been postponed until August. The stock exchange authorities demand a buyout offer be made to Staburadze's minority shareholders, a requirement which forces Staburadze to follow Latvian securities regulations. The stock is expected to post substantial gains only in the event the court rules against the majority shareholder, Gisli Reynisson, forcing him to announce the buyout.

The spirits manufacturer Latvijas Balzams fell 5.3 percent to 0.36 lats on news that the company's shareholders will gather for a general meeting August 14, to consider replacing top management. The Russian company S.P.I., which is the new owner of Latvijas Balzams, stated earlier that it is satisfied with the company's current management.

Lithuania: Stocks hit new lows amid slack trade

The Lithuanian stock market remained firmly entrenched in the summer doldrums last week despite the fact that most companies announced first-quarter financial results. Small one-off deals continued to dominate trading, with most of the stocks closing flat to lower. The bourse's benchmark price index Litin-10 edged down 0.3 percent to 990.57, the blue chip official list index Litin was off 1.5 percent to 360.93, and the broad index Litin-G finished off 3 percent at 854.92. Calculated in euros, the price index of the six Lithuanian Baltic List stocks was 2.1 percent lower, to 118.3.

The bourse's equity turnover reached 18.1 million litas ($4.5 million).

Traders say activity remains at a standstill as foreign investors are avoiding a volatile domestic market, and local investors lack available investment funds. On the official list, blue chip Lietuvos Telekomas saw the most active trade. Telekomas ended lower by 1.9 percent, to 1.48 litas, a new all-time low, with trade worth 260,600 litas. Telekomas' share price has been hovering around the 1.50 litas level for some time, and most traders say they see no reason for a boost in the price. The company's first-half results could add some interest to the shares, though reporting is not due until late July. "Like most Lithuanian stocks, Telekomas has a 'buy' recommendation. In my opinion, some investors buy Telekomas shares hoping that it will move higher in the future," Aurelijus Rimkus at the finance brokerage company Finasta said. Another 90,600 litas' worth of shares in the blue chip firm changed hands via block trading.

Refrigerator producer Snaige climbed 1.6 percent to 35 litas in trade worth 73,500 litas as uncertainity still prevailed about the sale of a controlling stake in the company. On July 13, Vygandas Juras, chairman of the supervisory board of Snaige, said Snaige intends to break off the negotiations with potential strategic investors if no agreement on the sale of a controlling stake is reached by the end of July.

On the current list, the oil company Mazeikiu Nafta was in the spotlight. The stock sank 5.7 percent to 0.66 litas in trade worth 79,400 litas. Another 16,600 litas' worth of shares changed hands in block trading. "This is the lowest level of Mazeikiu Nafta since the announcement about the deal between Williams and Russia's YUKOS. I think, falling prices of Mazeikiu Nafta is an indirect investor reaction to the news about the reduction in its authorized capital," Rimkus said. The broker has forecast that by next week, the shares should stop losing ground.

Mazeikiu Nafta has announced its intention to cut its authorized capital from 1.03 billion litas to 517.49 million litas in preparation for the sale of a 26.85 percent stake to YUKOS. The shareholders will be asked to vote on the authorized capital reduction at their meeting, scheduled for August 6. The authorized capital of Mazeikiu Nafta would be increased to 575.63 million litas later, after the Russian company buys the new equity issue.

Mazeikiu Nafta plans to reduce its authorized capital through a redemption of 517.4 million ordinary registered shares. Yet another Russian company, Tuymen Oil (TNK), is trying to prevent a deal with YUKOS.

On July 13, TNK said it had submitted an official offer to Lithuanian Prime Minister Algirdas Brazauskas on participation in the privatization process of Mazeikiu Nafta, proposing to organize a public tender for long-term oil supplies to Mazeikiu Nafta. According to unofficial data, TNK, which is majority owned by U.S. companies and the Russian Alfa Bank, is offering a 15-year guarantee for the supply of oil to Mazeikiu Nafta, as compared to the 10-year contract offered by YUKOS. TNK is set to pay 330 million litas for a 26.85 percent stake in the company, which compares to the 300 million litas offered by YUKOS.

Estonia's Hansapank completed, on July 6, its tender offer for shares in the savings bank Lietuvos Taupomasis Bankas, raising its shareholding in the Lithuanian bank from 91.80 to 96.57 percent. According to data provided by the National Stock Exchange of Lithuania, Hansapank purchased 798,173 shares in LTB for a total of 7.88 million litas. The Estonian bank intends to continue buying LTB shares as long as there is a supply. Hansapank will buy the shares at 9.88 litas, the price set at the tender offer. At this price, Hansapank had acquired 90.7 percent of LTB shares in early June.

Earlier this week, representatives of the NSEL and the Warsaw Stock Exchange discussed possibilities for mutual cooperation, and introduced the WSE trading system to participants of the local stock exchange. "It was a technical visit during which representatives of WSE learned about the trading system of the Vilnius bourse, and about the possibilities of introducing a common trading system used in the WSE," Rimantas Busila, chief executive of NSEL, said. However, many observers see this visit as the starting point of merging the two bourses.