Developments at Riga Stock Exchange in 2007

06.03.2008 RIG

Trading volume of the shares listed on the Riga Stock Exchange amounted to 72.3 million lats, which is a 17% increase over 2006. The number of trades was 33,503 with average value 2,156.6 lats – a 22% increase over 2006.

“The growth of trading turnover over the past years is a positive signal. However, to fuel the Latvian stock market, new listings of robust companies, such as Lattelecom or other private sector corporations, are indispensable. Also, it is critical that the companies already traded on the market increase their free float. The listed companies should enhance their corporate governance and investor relations. As to the stock exchange members, they are expected to be more committed in communicating the investment opportunities in Latvian securities to the investors”, points out Indars Aščuks, Deputy Chairman of the Riga Stock Exchange Management Board.

With the stock prices rising and securities market in the Baltic expanding, the Riga Stock Exchange index OMX Riga was on its upward path, hitting all-time high at 764.5 points on October 5, 2007, which was a 16.6% increase since the beginning of the year. The turmoil in the global financial markets in the wake of a crisis in the USA sub-prime mortgage market, together with the macroeconomic developments in the Baltic countries, had a significant impact on the securities market in Latvia – share prices went down, accordingly reflected by the OMXR index, to close the year at 600.0 points.

Riga and Baltic market index dynamics over the year

Despite the downslide of the share prices and index values, the Riga Stock Exchange equity market capitalization stood at 1.475 billion lats at the end of 2007, which is a 3% year-on-year increase.

Over the past year, the Baltic stock exchanges have implemented a number of enhancements towards facilitating the trading with the Baltic stocks. The stock exchange lists experienced restructuring in 2007, resulting in tightening of listing requirements for the Baltic Official list and a merger of the Baltic Secondary list with the Baltic Free list. Also, the OMX Group exchanges in Tallinn, Riga and Vilnius reviewed the trading fee structure with the purpose to bring down the costs to the stock exchange members and make trading with the Baltic securities more efficient. The stock exchanges in the Baltic countries have implemented other changes as well, in order to make the trading environment even more efficient, transparent and dynamic, simultaneously harmonizing it with the trading practices in the Nordic and other markets.

The most successful RSE listed companies

Top companies according to equity trading in 2007*

Main price gainers in 2007*

Main price losers in 2007*

* actively traded shares with trading volume above 1 million lats in 2007

Trading

According to the Riga Stock Exchange estimates, last year foreign investors have contributed at least 60-70% of equity trading – both via domestic and remote members; however, domestic members continue to dominate the market in terms of number of trades. In 2007, the number of trades executed by remote members, as well as the trading volume, has increased si gnificantly. Simultaneously, it should be pointed out that, in terms of value, an average trade by a remote member is about 2.5 times higher than that by a domestic member.

Domestic members’ trading activity at the RSE

Remote members’ trading activity at the RSE  

The data indicate that, in terms of value, the volumes of buy transactions performed by remote members broadly match those of sell transactions. This fact suggests that despite the volatility in global financial markets and the macroeconomic situation in the Baltic countries, foreign investors have not been in a rush to sell their holdings in Latvian companies late in the year. This is confirmed by the Latvian Central Depository data: at the beginning of 2007, 39% of investors were non-residents, while at the beginning of 2008 their share had increased to 40%.

The increase in remote members’ trading volumes was promoted by the introduction of Baltic Membership in 2007. Baltic Membership allows banks and brokerages obtaining a joint member status at the Riga, Tallinn and Vilnius stock exchanges, and subsequently do their trading with listed securities.

The data also suggest a pickup in cross-border trading. For example, the trading balance between the Latvian and Estonian markets reports that Estonian investors were involved in only 90 trades with Latvian shares back in 2004, while in 2007 the respective figure was 3692. The increase in the number of trades performed by Latvian investors with Estonian shares has been similar – from 82 trades in 2004 to 6682 in 2007.

E-broker services

E-broker, a trading platform developed by the Riga Stock Exchange and designated for retail customers, had 184 users at the end of 2007, 59 of them enjoying access to all three Baltic markets, meaning they were able to trade with the shares of Latvian as well as Lithuanian and Estonian listed companies.  

The number of e-broker clients trading across the three Baltic markets has increased by 74% over the past year.

E-broker users have been involved in altogether 15,631 trades – 9% down from 2006; the total trading volume amounted to 7.01 million lats – a 15% decrease since the previous year. An average e-broker trade was 448.47 lats. E-broker users contributed 46.8% of total number of trades executed on the RSE.

E-broker trading statistics

Indars Aščuks believes: “The activity of retail clients and their impressive contribution to the total number of trades deserve a positive evaluation, since it enhances the market liquidity. The fact that e-broker users have been indeed very active confirms the importance of accessibility of platforms allowing on-line trading.  Here the banks and brokerages have a large potential to attract new clients via developing and offering internet-based securities trading platforms”.

 The companies most popular with e-broker clients

The geographical distribution of the most preferred stocks, as well as the growing numbers of the e-broker service clients who are trading across all three Baltic markets suggest that investors increasingly perceive the Baltics as a single investment area.

At the end of 2007, the Riga Stock Exchange had 42 listed companies, including 6 on the Baltic Official list and 36 on the Baltic Secondary list. Also, 33 debt securities and 26 investment fund units were listed on the Riga Stock Exchange at the end of the year.

Right now, the Riga Stock Exchange has 27 members.