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Despite the considerable rise in Latvijas Gaze's shares, the continued fall in Eesti Telekom and Lietuvos Telekomas caused the Baltic List capitalization to fall 0.8 percent, to 2.53 billion euros ($2.21 billion). The high prices bid at a special auction for Latvijas Gaze boosted the week's Baltic List turnover to 21.9 million euros, against 2.4 million euros the previous week. Latvian stocks generated 87.2 percent of the total turnover, Estonian shares provided 12.5 percent, with Lithuanian stocks combining for only 0.3 percent. Baltic List stocks held dominating positions on the Estonian and Latvian stock markets, accounting for more than 90 percent of the local stock market turnover. In Lithuania this number was only 4 percent.
Estonia: Telekom results depress trading
On the Tallinn Stock Exchange, attention was focused on the financial results of Eesti Telekom, released July 19, though shares of Hansapank continued to be the most heavily traded. The TALSE stock index fell 1.9 percent to 137.97. Calculated in euros the price index of the six Estonian Baltic List stocks also fell, by 0.9 percent, to 126.96. The total bourse's turnover was 46.9 million kroons ($2.62 million), conducted through 480 transactions.
Eesti Telekom shares traded in negative territory the entire week. "Early in the week, shares in Telekom were negatively influenced by Western markets," Uhispank broker Jaanus Sarv told BNS. The results, published on July 19, surprised analysts with numbers at the lower end of forecasts, generated negative sentiment and pushed the share price lower, the broker said.
Of the leading stocks, shares in Eesti Telekom fell the most, down 6.6 percent, to 66.75 kroons on trade worth 12.6 million kroons. After release of first half results Uhispank lowered the year-end price target for Eesti Telekom shares, from 105 kroons to 90 kroons per share, due to lowered profit estimates and higher risks related to regulatory issues in the communications sector. In another sign of weakness, Eesti Telekom Board Chairman Jaan Mannik said that repurchase of publicly owned shares from the market is unlikely at the present time, as they don't represent fair market value at these levels. "I wouldn't risk it at the present price level," Mannik said. For the repurchase of shares one has to be convinced that a year later their price is higher, Mannik said. "I do not have the conviction that the situation is certainly much better in a year's time," he admitted.
Shares in Norma climbed 2.6 percent to 50.30 kroons on a turnover of 5.8 million kroons. Shares traded in a relatively tight range, from 49 kroons to 50.70 kroons. Sarv said Norma's climb was connected to comments made by Norma directors, who made claims to the effect that the firm intends to increase its sales by 20 percent annually over each of the next five years. "Norma's results are expected next week and the effect of the statement to Brunswick can be seen then," the broker said.
With 23.1 million kroons in turnover generated during the week, shares in Hansapank were the most traded, with its price up 1.4 percent to 154.25 kroons. The broker said Hansapank's strength would remain.
In other news, the Tallinn Stock Exchange has turned to the securities inspectorate, asking it to carry out some necessary supervisory measures toward Ernesto Preatoni's real estate company Pro Kapital, areas which are outside the bourse's own competence. According to unofficial information, the Tallinn Stock Exchange may have reason to suspect something wrong in Pro Kapital's intra-company pricing transactions, which have potentially disadvantaged small shareholders' interests. Pro Kapital closed 0.8 percent lower at 59.40 kroons.
Latvia: Traders caught off guard by high bids
The Latvian stock market was taken by surprise late last week in its auctioning off of a 2 percent state-owned stake in the Latvian gas company Latvijas Gaze. The shares were sold for a price of 12.51 lats ($19.85) each, more than three times the average daily price. After the auction, Latvijas Gaze's shares continued trading higher, leading the Dow Jones Riga Stock Exchange index to a gain of 10.7 percent, to 149.78.
Meanwhile, losses in most low liquidity stocks caused the RICI price index to fall 0.3 percent, to 146.74. For the first time in the short history of the Latvian stock market, the DJRSE was priced higher than the RICI index. The three Latvian Baltic List stocks gained 8.9 percent, reaching 164.88, thanks to the gains reported by Latvijas Gaze. The gas company auction boosted turnover as well, reaching 10.6 million lats.
Latvijas Gaze's shares gained 17.1 percent, reaching 4.77 lats per share, though still considerably lower than the price bid at last week's auction. It is most likely that the shares will continue gaining ground next week, although this depends on what the government and the Latvian Privatization Agency decide to do with the 6 percent stake still held by the state. Despite announcements made by a number of politicians claiming that the 12.51 lats per share in Latvijas Gaze is an "honest price," brokers and privatization agency analysts agree that the price is much too high from the point of view of company fundamentals. It is most likely that the high price can be explained by the interest of a number of companies, namely Russia's Gazprom and Itera, to gain control over Latvijas Gaze's operations. Currently, the German and Russian shareholders hold roughly equal stakes in the company, meaning that the remaining 6 percent will play a decisive role in gaining control.
It is difficult to understand the Latvian Privatization Agency's decision to sell 3 percent of its remaining 6 percent stake for privatization vouchers. What is clear is that revenues from selling the shares for privatization vouchers will not be as large as if they are to be sold for cash. This decision by the privatization agency was blocked on July 20 by Latvian Prime Minister Andris Berzins; therefore, Latvijas Gaze's influence on the stock market next week will depend on a final decision on this issue.
Along with Latvijas Gaze's shares, investor attention was directed toward shares of the oil terminal Ventspils Nafta, with the shares gaining 1.7 percent, to 0.60 lats, on a turnover of 38,141 lats. The RICI price index was down due to losses in low liquidity shares, amongst these being the pharmaceuticals company Olainfarm, down 18.2 percent to 0.09 lats, and Liepajas Metalurgs, off 11.8 percent to 0.15 lats.
Lithuania: Telekomas down again to new all-time low
The Lithuanian Stock Market ended yet another lackluster week, as trading volumes remained thin with investor attention focused on only a few stocks. One of these, Lietuvos Telekomas, again hit a new all-time low. The bourse's benchmark price index Litin-10 eased 1.4 percent to 976.19, the blue chip official list index Litin was off 3.5 percent to 320.01, while the broad index Litin-G edged down 2.5 percent to 832.77. Calculated in euros, the price index of the six Lithuanian Baltic List stocks eased 4.1 percent to 113.37. The bourse's equity turnover reached 7.15 million litas ($1.8 million). Trading in government debt securities generated an additional 11.1 million litas in turnover.
The blue chip Lietuvos Telekomas was the most actively traded official list share for the week. Telekomas closed lower by 4 percent at 1.42 litas in trade worth 170,400 litas. On July 17, the blue chip dropped to 1.39 litas, a record low closing level. Snaige slumped 5.7 percent to 33 litas amid a turnover of 36,000 litas.
The brewer Kalnapilis climbed 2.5 percent to 4.10 litas with 14,200 litas' worth of shares traded. Cheese maker Rokiskio Suris closed higher by 1.1 percent at 18.21 litas on a turnover of 13,200 litas; TV-tube manufacturer Ekranas slumped 5.9 percent to 5.50 litas amid a turnover of 8,200 litas; the knitwear manufacturer Utenos Trikotazas was not traded in the outgoing week.
On the current list, the oil company Mazeikiu Nafta closed flat at 0.66 litas with 126,800 litas' worth of shares traded, amid sporadic trading interest. Pieno Zvaigzdes leveled off at 1.40 litas amid a turnover of 56,500 litas; the savings bank Lietuvos Taupomasis Bankas was stable at 9.88 litas in trade worth 33,700 litas; the gas company Lietuvos Dujos was up 1.5 percent to 1.32 litas on a turnover of 27,800 litas; the furniture maker Vilniaus Baldu Kombinatas sank 2.2 percent to 4.40 litas with 23,400 litas' worth of shares traded. LISCO Baltic Service and Lietuvos Juru Laivininkyste, quoted on the current list, were down 19.2 percent to 0.67 litas and 14.6 percent to 0.35 litas, respectively; Lithuanian shipyard plummeted 14.1 percent; the pharmaceutical firm Sanitas shed 10 percent, and the holding company Naftos Terminalas was higher by 10 percent on no trade in the shares.
In block trading, 6 million litas' worth of shares in Ukio Bankas changed hands. Vygantas Sliesoraitis, chairman of the bank's board, declined to comment on the deals, noting that there was a lack of information about the buyers.