Extract from the 1998 guide to central and eastern European equities
Boosted by improving economic fundamentals, the Riga Stock Exchange also enjoyed a relatively successful year in 1997 although in common with its Baltic peers it experienced a sharp reversal of fortune in the fourth quarter of the year.
The headline DJRSE index posted a 42% increase in 1997, rising from 250 at the start of January to 345 by the end of December, having breached the 500 level in early October. The index is expected to record a similar level of growth in 1998 and to reach 480.
The most notable share issue of 1997 came in the shape of a global depositary receipt (GDR) offering for the country’s leading bank, Unibanka, which resulted in the bank becoming to the first Baltic entity to achieve a London Stock Exchange listing. Lead managed by Union Bank of Switzerland, the issue raised proceeds of $25.62 million for the Latvian government.
Despite a relatively downbeat end to the year, which saw a poor reception for domestic share offerings by juice producer Gutta and pharmaceutical company Grindex, 1998 is expected to witness strong growth in the Latvian equity market. Market capitalization is forecast to expand fourfold to between $1.2 – $1.5 billion by year end 1998 from $352 million at year end 1997. Turnover too is set to rise sharply, climbing from $84.5 million to $265 million.
In the coming months oil company Ventspils Nafta is set to become the second Latvian entity to issue GDRs as part of Latvia’s privatization programme which will also include the sale of government stakes in train repairer Lokomotive and stevedoring company Rinuzi as well as strategic enterprises such as Latvijas Gaze and Latvian Shipping Company.
A major influence on the Latvian market will be the Law On Investment Funds which will come into force on July 1 1998 and which is expected to lead to the transfer of surplus cash holdings in bank deposits to investment funds which will be invested in the stock market.
