Extract from the 1998 guide to central and eastern European equities
Despite the negative effects of the financial turmoil in emerging markets as a result of the economic meltdown in Asia, the Tallinn Stock Exchange (TSE) still enjoyed a successful year in 1997.
Boosted by Estonia’s impressive economic performance, which earned the country Baa1 and BBB+ ratings from Moody’s Investors Service and Standard&Poor’s respectively, in 1997 the TSE’s headline TALSE index recorded a 65% increase for the year in both local currency and Deutschmark terms, closing on December 31 1997 at 265.35, from 162.5 as at January 1 1997.
At one point in August the TALSE tested the 500 level, but then fell back sharply on the back of an emerging-market sell-off which hit all the Baltic markets. In 1998 the TALSE is forecast to reach at least the 450 level which equates to at least a 50% rise.
Some 11 new stocks were listed in 1997 and in 1998 a number of major new additions are expected, including Estonian Shipping Company, Estonian Insurance and Estonian Telecom.
These new listings are expected to boost the total market capitalization from $1.08 billion to around $1.94 billion, with turnover set to rise from around $1.5 billion to $2.6 billion.
The most actively traded shares are those of the country’s leading banks and turnover in the banking sector is set to grow further in 1998 following the announcement of the merger between Hansabank and Hoiupank which will to create the largest financial institution in the Baltics.
The news of the tie-up has already sparked speculation that there will be further consolidation in the banking sector, making smaller Estonian banks potential takeover plays.
Industrial stocks in contrast have been of less interest because of their lower liquidity and fears of increased competition, both from domestic and international firms.
