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Higher global stock markets mirrored in Baltics

  • 2001-11-01
  • Boris Epsteins
Rising global stock markets last week encouraged investors back into Baltic states' shares as well. The Baltic index of 14 blue chips traded on the Tallinn, Riga and Vilnius bourses rose 0.35 percent to 137.09. The index was prevented from going higher by a fall in shares of the natural gas company Latvijas Gaze.

Of the 14 Baltic List stocks, only four posted losses, when priced in euros, while the rest, taking their cue from from the largest Estonian companies, Eesti Telekom and Hansapank, showed gains. This broadly based upward movement pushed higher the Baltic List capitalization by 2.2 percent to 2.32 billion euros ($2.13 billion). A single trade with shares in Lithuania's brewery Kalnapilis boosted the Baltic List turnover nearly eight times above a week earlier results, to 45.2 million euros.

Lithuanian stocks accounted for 84.42 percent, Estonian 7.83 percent and Latvian 7.77 percent of the total Baltic List turnover. The Baltic List shares dominated trading on their home bourses, securing over 85 percent of the total stock turnovers on the Tallinn, Riga and Vilnius exchanges.

Estonia: Traders find lots to be positive about

The main domestic events shaping trading on the Tallinn Stock Exchange last week were the release of third-quarter results by Hansapank and Viisnurk, and the Finance Ministry's announcement of a possible extension of the expiration date for the EVP privatization securities. The stock index TALSE, reflecting gains by Eesti Telekom and Hansapank, climbed 4.19 percent to finish before the weekend at 125.41. Calculated in euros, the price index of the five Estonian Baltic List stocks gained 0.77 percent to 114.62. Tallinna Kaubamaja and Merko Ehitus shares traded weaker. Turnover for the week totaled 64 million kroons ($3.7 million).

Trading stayed in positive territory, supported by earnings releases and an upbeat global outlook, said Uhispank capital markets strategist Aivo Kangus. Estonian stocks are now taking their cue from global trends rather than from local macro or micro indicators, and this continued to be true for last week, he added.

The biggest upward movement by any separate issue was posted by Telekom, climbing 5.5 percent to 57.50 kroons on a turnover of 12.06 million kroons. Hansapank was up by 4.59 percent at 142.50 kroons on trade worth 36.1 million kroons, accounting for more than half of the total market turnover.

The Finance Ministry published a plan at the start of the week which would extend the validity period for EVPs until the year 2005. "The anticipated extension of the term during which EVPs can be used didn't lead to a significant decline and the price held relatively well, while trading activity declined," Kangus said. "I wouldn't expect any major movements in the coming days." The price of the privatization certificate dropped 4.59 percent to 0.582 kroons on trade worth 5.3 million kroons.

Kangus added that the local markets may suffer a shock on Oct. 31, when initial estimates of the United States' third quarter gross domestic product will be released. He warned that figures published already this week showed weak growth in sales of industrial goods, which prompted calls for caution in long term growth forecasts.

The Estonian Finmin will publish lowered economic growth forecasts for 2002. This revision reflects collateral damage as a result of substantial downward adjustments to economic growth forecasts made by the central banks of Estonia's leading trade partners.

Latvia: Good corporate news boosts activity

The release of nine-month operating results by most of Latvia's publicly traded companies snapped investors into action on the Latvian stock market. Share turnover on the stock exchange increased four times over the previous week, to 2.02 million lats ($3.25 million).

The capitalization index DJRSE dropped 1.1 percent to 180.36 amid losses posted by Latvijas Gaze. The natural gas company's shares acted as an anchor on the index of Latvian stocks participating on the Baltic List, with the list falling by 0.86 percent to 191.84. The price index RICI meanwhile rose 1 percent to 148.84.

Latvijas Gaze lost 2 percent to 5.9 lats amid a sharp jump in the gas stock's trading volume. Trading in the gas company's shares generated a turnover of nearly 2 million lats, in which block deals accounted for the lion's share.

The company reported a strong nine-month profit figure of 6.9 million lats, which is already well ahead of its full year's forecast of reaching a profit target of 4 million lats. Further good news for Latvijas Gaze was the plan considered by the Latvian government concerning gas trade liberalization in Latvia.

The legislation offers to block the entrance of new players onto the market, thus maintaining the monopoly the mutually closely linked Russian companies Gazprom and Itera share as partners in the influential position as sole supplier of natural gas to Latvian residential and business customers, as well as to customers in the two other Baltic states. This situation most likely will continue well into the future.

What the legislation additionally stipulates is that the gas supplier will be able to independently set the tariffs - something Latvijas Gaze had been striving to achieve for a long time. This could be worryingly problematic if the government refuses to set up a regulatory agency to monitor and control what could possibly become predatory monopolistic behavior, and abuses, in allowing Latvijas Gaze to set their own pricing levels. What is good news for the monopolist is not always good news for the consumer.

The Latvian government early next week will consider ways for selling the 3 percent stake in the gas company still owned by the state. Taking into account the complicated budget situation, the most likely approach seems to be where the shares are sold at auction on a cash basis. In such a case the auction price is unlikely to differ greatly from Latvijas Gaze's current market price. The steep rise of the privatization voucher's market price indicates that many expect the government will decide to sell the state-owned shares in the gas company for privatization vouchers.

The suggestion to sell the shares directly to the gas company's German shareholders seems the most unlikely, taking into account the possible negative reaction to such a decision by the company's Russian shareholders, who would like to remain the only gas supplier to Latvia.

In other news, the oil terminal Ventspils Nafta at the end of the week announced an increased annual profit target, from 13.5 million lats to 17.3 million lats, in the wake of the terminal's solid nine month operating results. The results were announced too late on Oct. 26 to have any effect on the company's stock price, and shares remained virtually unchanged at 0.75 lats each amid low turnover.

The stock may rise during the coming week, though. Apart from its good financial indicators, increasing tension between Russia's oil company LUKoil and the oil transport company Transneft may produce a positive result for Ventspils Nafta, as LUKoil may be forced to increase its delivery of oil through the Ventspils port.

Meanwhile, the fiberglass company Valmieras Stikla Skiedra has seen increased investor interest for the third week in a row. Apart from its positive nine-month operating performance, smaller investors are lured by the fact that Valmieras Stikla Skiedra's major investor group views encouragingly the company's prospects, which are manifested in plans to increase the share capital by two times, to over 30 million lats.

Lithuania: Markets end higher

The Lithuanian stock exchange saw volatile trading, though overall central market turnover fell by more than six times compared to the previous week's figure. Early in the week, market heavyweight Lietuvos Telekomas led the bourse higher, but on Oct. 25, when access to online trading results was interrupted as a result of disruptions in the trading system, traders immediately stepped back. On Oct. 26, the stock market made a partial recovery, with refrigerator maker Snaige taking center stage.

The bourse's continuously tracked price index Litin-10 edged up 1.88 percent to 1,032.99; the blue chip official list index Litin closed 0.15 percent higher at 305.48; and the broad index Litin-G ticked up 2.05 percent to 824.82. Benefitting from large block deals, the week's equity turnover reached a record 148 million litas ($37 million).

On the official list, Lietuvos Telekomas closed flat at 1.26 litas with 396,600 litas' worth of shares traded. Refrigerator maker Snaige drifted 1.37 percent lower to 36 litas on a turnover of 102,400 litas; the brewer Kalnapilis advanced 0.17 percent to 6.02 litas in trade worth 91,400 litas.

Cheese maker Rokiskio Suris edged up 0.91 percent to 25.50 litas with 42,100 litas' worth of shares traded; TV-tube manufacturer Ekranas rose 1.15 percent to 4.40 litas amid a turnover of 23,200 litas; knitwear producer Utenos Trikotazas was up 0.33 percent to 3.01 litas on a turnover of 3,600 litas. On the current list, the gas firm Lietuvos Dujos edged 4.65 percent higher to 1.80 litas in trade worth 96,500 litas, and power utility Lietuvos Energija rose 8.33 percent to 0.39 litas with 56,400 litas' worth of shares traded.

The shipping company Lisco Baltic Service rallied 7.69 percent to 0.28 litas in trade worth 50,800 litas; the dairy Zemaitijos Pienas lurched up 7.87 percent to 8.91 litas amid a turnover of 33,700 litas. In block trading, 1.23 million litas' worth of shares in electronic component maker Vilniaus Vingis changed hands at prices ranging between 4.50 litas and 8 litas. A total of 1.02 million litas' worth of shares in the holding company Invalda changed owners at 1 litas apiece on Oct. 24.

On Oct. 25, the Danish Brewery Group bought 86.6 percent of shares in Kalnapilis through a 135.18 million litas block deal, completing the acquisition of the majority interest in one of the country's leading breweries. Also last week some 7.44 million litas' worth of shares in the brewery Ragutis changed hands at price ranging between 12.18 litas to 12.56 litas and 840,600 litas' worth of shares in the gas firm Lietuvos Dujos were sold in large deals.