Stability returns to Baltic index - what next?

The Baltic index's downward spiral was brought to a halt last week due to a resurgence in Latvijas Gaze's share prices, but few analysts are venturing forth with any predictions about its continued strength. Alongside Latvijas Gaze, the index was positively affected by Estonia's Hansapank results, which planted a much needed seed of optimistism amidst a sceptical group of traders. The Baltic index climbed 2 percent over the week to 144.06, despite its mid-week tumble to 135.

Out of 15 Latvian, Lithuanian and Estonian blue chips included on the Baltic List, seven moved up, an equal number fell, and Pro Kapital remained in detention. The move into higher territory by two of the most highly capitalized Baltic List stocks - Latvijas Gaze and Hansapank - pushed the Baltic List capitalization up 1.9 percent to 2.69 billion euros ($2.46 billion). The Baltic List turnover fell three times, to 6.5 million euros, as compared to the 22.5 million euro level hit the previous week. Estonian stocks contributed 68.5 percent of the weekly turnover, Latvian stocks accounted for 22.5 percent while Lithuanian stocks brought in only 9 percent. The Baltic List stocks remained absolute turnover leaders on the Estonian and Latvian stock markets, generating over 95 percent of the total stock market volume on their respective home bourses. In Lithuania this figure was 40 percent.

Estonia: Hansapank results add life to moribund bourse

Slack trading continued on the Tallinn Stock Exchange during the last week, picking up only after Hansapank released its half year results on August 23. Eesti Telekom meanwhile continued its weekly saga of testing new lows, though it recovered slightly by week's end. The TALSE index added 1 percent, closing at 131.98, with total turnover at roughly 72 million kroons ($4.2 million), three-fourths of which was made up by deals in Hansapank's stock. Calculated in euros, the price index of the six Estonian Baltic List stocks was up 1.5 percent to 126.13.

"Hansapank's results offered the market a positive signal, and after the release of the results, buying interest prevailed with solid turnovers," Trigon Markets trader Kristel Kivinurm said. Based on second quarter results, Trigon Markets will probably cut its forecast for Hansapank's provisions requirement for year-end and, consequently, the profit estimate will move higher, but Trigon still isn't planning to change Hansa's year end price target from its current 190 kroons. Hansapank climbed 2.4 percent to finish at 160 kroons, with a five-day turnover of 54.3 million kroons.

"Telekom's share has stabilized in the short term, buying interest is back," Kivinurm said. Telekom closed at 53 kroons on Aug. 22 but strengthened slightly by Aug. 24, its shares down 1.3 percent for the week to 54.00 kroons on trade of 13.7 million kroons.

On a more negative note, last week the Tallinn Stock Exchange's listing committee said it had uncovered evidence against AS Pro Kapital Group, showing it has repeatedly violated stock exchange rules and regulations, and of damaging investors' interests. The listing committee will next meet on Aug. 28 and, until then, trading in Pro Kapital's securities, suspended for nearly a month, will remain off the listing.

Latvia: Volatile week ends with higher share prices

The Latvian stock market was characterized by volatility among its leading stocks. As the speculative interest in Latvijas Gaze shares increased, both its share price and the Dow Jones Riga Stock Exchange capitalization index posted substantial gains. The DJRSE rose 4.2 percent to 233.75, and the euro price index of the three Latvian Baltic List stocks was sharply higher, by 8.7 percent, to 245.81. At the same time, the local price index RICI inched down 0.3 percent to 162.06 from large losses by low liquidity stocks such as the candy maker Staburadze, pharmaceuticals Olainfarm and fish processor Kaija. Even the major PR campaign promoting Kaija's plans to open a production facility in Russia could not prevent its shares from falling. The weekly turnover on the bourse was 875,000 lats ($1.4 million). Apart from trade in equities, Latvian brokers benefitted from activity in the government debt market, worth 3.6 million lats.

Latvijas Gaze jumped 5.7 percent to 8.51 lats on a turnover of 830,000 lats despite dropping to as low as 6.5 lats per share at mid-week. Most analysts believe such price fluctuations are indicative of speculators risking their money in the belief that a strategic battle is being waged over control of state-owned shares going up for auction. Analyst Ivars Bergs, with the savings bank Latvijas Krajbanka, expects this to continue at least until Aug. 30, when another state-owned 3 percent stake is put on the auction block.

The minimum sales price at the auction has been set at 5.62 lats per share for Latvijas Gaze. The shares should sell for a higher price, though bids at the upcoming auction are not likely to beat the record prices set at the previous auction, when the gas company's shares sold for 12.51 lats apiece. This time, most analysts are extremely cautious in making predictions on the share price at the auction, or about further share price expectations when trading resumes. Bergs said "there are too many likely scenarios of further developments, therefore it is too difficult to make any forecasts today."

Suprema analyst Martins Krutainis also believes that at present it is futile to make any attempts at predicting the likely price for Latvijas Gaze shares. He noted, however, that "the period of high interest in these shares may come to an end" after the sale of the last state-owned 3 percent stake in Latvijas Gaze, which is scheduled to be held in September-October.

Apart from Latvijas Gaze, other stocks failed to draw all but the minimum interest, such that the weekly turnover of even the most active stocks did not exceed 20,000 lats.

Analysts say that next week is not likely to bring any positive changes in trading, except in Latvijas Gaze.

Lithuania: No signs of market recovery

Hopes that the Lithuanian stock market will recover in early autumn dwindled last week, as trading volumes remained thin with investor attention centered on just a few stocks. The bourse's benchmark price index Litin-10 firmed 1.4 percent to 999.15, the official list index Litin inched up 0.8 percent to 307.57, while the broad index Litin-G eased 1.5 percent to 767.20. Calculated in euros, the price index of the six Lithuanian Baltic List stocks gained 0.7 percent and closed at 111.10. The bourse's equity turnover came to 5.28 million litas ($1.32 million). In addition, government debt securities trading generated 23.5 million litas of turnover.

Lietuvos Telekomas shares were at the center of trading interest, with volume reaching 454,400 litas. Telekomas' share price slouched to an all-time low of 1.28 litas at the start of the week, but later rebounded and ended the week 0.7 percent higher at 1.31 litas. "Interest (in Telekomas shares) has strengthened lately - both from local and foreign investors. Shares in telecommunication companies remain weak in the neighboring markets, and it's too early to speak about any substantial gains in Lietuvos Telekomas' price, however," said Tomas Andrejauskas, head of the financial brokerage department at Hansabankas.

Trading in Snaige shares increased somewhat, too. The refrigerator manufacturer's shares climbed 3.2 percent to 32 litas amid a turnover of 100,400 litas. Another 1.57 million litas' worth of shares changed hands through block deals.

Elsewhere on the official list, trading volumes were thin. The cheese maker Rokiskio Suris jumped 1.6 percent to 21 litas amid a turnover of 35,900 litas, the brewer Kalnapilis was stable at 4.30 litas in trade worth 19,200 litas, knitwear producer Utenos Trikotazas slid 1.7 percent to 2.75 litas in trade worth 16,700 litas, while TV-tube maker Ekranas was up 1.5 percent with 12,800 litas' worth of shares traded.

On the current list, Lietuvos Dujos edged up 0.7 percent to 1.43 litas amid a turnover of 88,500 litas. Traders attributed the stock's improved performance to the gas utility's upcoming privatization and to the highly successful sale of a state-owned stake in the Latvian gas company Latvijas Gaze. The electronic component maker Vilniaus Vingis, the brewer Kalnapilis and the dairy group Pieno Zvaigzdes saw little movement, with shares ending at 4.50 litas, 10 litas and 1.35 litas respectively, under modest trading volumes. In block trading, 1.88 million litas' worth of shares in Vilniaus Vingis, 515,000 litas' worth of shares in tannery Siauliu Stumbras, and 336,800 litas' worth of shares in Siauliu bank found new owners.