Stock markets slump in wake of attacks on U.S. targets

  • 2001-09-20
  • Boriss Epsteins
The tragic and destructive terrorist attacks in the U.S.A. earlier this week will impact the world's economy and has already materially affected the Baltic stock markets. Almost all of the more or less liquid stocks in the Baltics saw their prices fall, the exception being Latvian energy shares. Over the past week the Baltic List, the index of 15 blue chip stocks, was down 0.9 percent, to 123.28.

Latvia's gas utility Latvijas Gaze and the oil terminal Ventspils Nafta held strong, supported by rising world oil prices, which prevented any further fall in the index. Meanwhile, capitalization of the Baltic List fell 2.2 percent, to 2.2 billion euros ($2.02 billion) with losses in Estonia's Eesti Telekom and Hansapank, and Lithuania's Lietuvos Telekomas.

Losers outnumbered gainers on the Baltic List 13 to 2 for the week. A large amount of block deals saw the total turnover almost triple from previous results to 18.1 million.

Latvian shares gave 63.3 percent of the total, while Estonian stocks covered 31.3 percent and Lithuanian 5.4 percent. Baltic List stocks dominated on Estonian and Latvian bourses, covering over 95 percent of the total turnover, while Lithuania's Baltic List stocks comprised 4 percent.

Next week Baltic investors will have their eyes turned to developments in world markets. Some speculative interest in Estonia's Hansapank may arise after company boss Indrek Neivelt announced a possible sale after SEB and Swedbank merge. It seems that selling the Swedbank owned Baltic Hansapank group would be much easier than finding a buyer for the not so beneficial SEB owned Eesti Uhispank, Latvijas Unibanka and Vilniaus Bankas.

Estonia: Market feels negative impact of U.S. events

The devastating terrorist attacks against U.S. landmark buildings Sept. 11, which left the world markets in insecurity and volatility, had a major impact on the Tallinn Stock Exchange. In the course of the week, the index TALSE lost 2.9 percent of its value to close at 115.01. Calculated in euros, the price index of the six Estonian Baltic List stocks was off 2.8 percent, to 108.72. In 996 deals a total of 91.4 million kroons' ($5.35 million) worth of securities changed hands. "We were tied to the American events: like elsewhere, it was over-reaction all the way from the beginning, then the markets calmed down and investors' self-confidence was restored," Trigon Markets trader Kaur Elviste said. He pointed out that the Estonian market managed to remain cool, as the scope of volatility that the market exhibited showed a minimal amount of insecurity among investors.

The market's most traded issues lost about 3 percent of their value in the five days and deals with Hansapank's shares accounted for over half of this total turnover. Hansa came in 3.5 percent lower to finish at 142 kroons on trade of 50.9 million kroons, while Eesti Telekom dropped 3.1 percent to 45.75 kroons in trade worth 30.7 million kroons Sept. 14. The week's lowest levels for Hansa and Telekom were, respectively, 134 kroons and 40 kroons, recorded during the first hour of trading on Sept. 12 when investors found themselves in an information limbo which resulted in massive selling. U.S. stock markets were closed from Sept. 11, with trading expected to resume on Sept. 17.

Latvia: markets buck world trends

Latvia's stock market again showed its opposite trendencies towards world markets last week with the Latvian shares, which make up the Baltic list index, gaining 7.8 percent, to 174.78. The Dow Jones Riga Stock Exchange capitalization index gained 8.5 percent to 163.67, while the RICI index was down 3.6 percent to 149.5. Including the large block deals with shares in the gas utility Latvijas Gaze, the Riga bourse turnover was 6.69 million lats ($10.76 million). Both the Riga capitalization and the Baltic List index's gains followed strong Latvijas Gaze and Ventspils Nafta moves.

Ventspils Nafta gained 8.2 percent to 0.79 lats on a turnover of 130,596 lats, while Latvijas Gaze gained 10.8 percent to 5 lats on a turnover of 6.35 million lats. The large number of block deals in Latvijas Gaze shares did not affect the company's shareholder structure.

A jump in global oil prices boosted the price of Latvian energy companies. Ventspils Nafta stands to benefit from developing global tensions which are forcing up freight prices through the Persian Gulf, leading to expectations that Russia will have to re-route its south-bound oil exports more to the north, bad news for Russia's southern Novorosysk port. The world crisis has not affected Latvijas Gaze itself so much, but as gas prices are pegged to the price of heating oil, increased profits may also be coming the gas utility's way, as the company holds a significant amount of its 4 billion cubic meters of natural gas in an underground storage facility at Incukalns.

Last week also saw additional significant news released for investors in Latvijas Gaze. First, it was basically announced that Russia will now, through Gazprom and Itera Latvija, be holding over 50 percent of the stakes in Latvijas Gaze, both companies to split the share in equal amounts. The German held stake in Latvia's gas utility will probably not exceed 45 percent, controlled by Ruhrgas and EON.Energy.

It seems that the successful Russian lobby in Latvia has also allowed the Russians to basically dictate their terms for the gas utility privatization process in Lithuania, Gazprom wanting full control over Lietuvos Dujos. It was also announced that the remaining 3 percent state-owned stake will be sold off in exchange for privatization certificates instead of cash, leaving the state with only a symbolic 2 shares in the national gas utility.

Remaining trade in Riga was comparatively low and followed no trend.

Lithuania: Telekomas hits record low

The Lithuanian stock exchange followed a downward trend in the last week. Most stocks lost ground early, with blue chip Lietuvos Telekomas hitting another all-time low, while at the weekend share prices stabilized as trade volumes evaporated. The benchmark price index Litin-10 eased 1.3 percent to 1,012.03, the blue chip official list index Litin plunged 7.1 percent to 280.60, while the broad index Litin-G fell 4.9 percent to 741.15. Calculated in euros, the price index of the six Lithuanian Baltic List stocks fell 5.1 percent to 112.10. Due to the large amount of block deals, the bourse's equity trading turnover reached 86.9 million litas ($21.7 million).

Blue chip Lietuvos Telekomas, listed on the official list, was in focus. Telekomas slumped 8.7 percent to 1.15 litas in trade worth 344,100 litas. After the attack on New York and Washington on September 11, the stock fell to 1.08 litas, its new historical low. The losses mostly followed the price crash on global markets following the terrorist attacks in the U.S.A., said Martynas Kulvinskas, head of the securities trading unit at the agricultural bank Zemes Ukio Bankas.

The cheese maker Rokiskio Suris inched up 0.05 percent to 22.01 litas in trade worth 79,600 litas. Refrigerator maker Snaige was also flat, at 36.50 litas, with 49,100 litas' worth of shares traded. Last week Snaige raised its 2001 turnover and profit forecasts after releasing good eight-month results. The company posted a net profit of 6.65 million litas for the period, compared to a loss of 660,000 million litas a year earlier. The TV-tube maker Ekranas slid 7.6 percent to 5.40 litas on a turnover of 11,100 litas. Brewer Kalnapilis sank 6.4 percent to 4.21 litas amid a turnover of 15,300 litas. And the knitwear manufacturer Utenos Trikotazas was not traded during the week.

On the current list, the gas company Lietuvos Dujos climbed 1.9 percent to 1.58 litas amid a turnover of 65,700 litas as Russian Gazprom increased its effort to obtain a controlling stake in the Lithuanian company. The insurer Lietuvos Draudimas plummeted 23.4 percent to 168.50 litas with 86,300 litas' worth of shares traded. Some market analysts attribute a drop in Lietuvos Draudimas' share price to falling prices of insurers' shares globally after the terrorist attack in the U.S.A. But as the Lithuanian company is not related to the event, the drop should be short-lived, analysts believe.

The Klaipeda Stevedoring Company closed 1.1 percent higher at 4.50 litas amid a turnover of 44,000 litas; the electronic component maker Vilniaus Vingis rose 3.3 percent to 4.65 litas in trade worth 47,100 litas.

In block trading KLASCO saw 36.23 percent of its shares change hands through a single deal. The buyer paid a total of 80.65 million litas for a block of 4.59 million shares, or 17.57 litas a share. "It was a transaction between shareholders of KLASCO aimed at covering debts," Arturas Silinis, director of Kapitalo Srautai, the financial brokerage company that handled the deal, told BNS. He gave no more details.