Estonian securities market in the second quarter of 2010

06.07.2010 TLN

Quarterly commentary by NASDAQ OMX Tallinn, July 6^th, 2010

In the first half of this year, two Estonian companies conducted public offerings of their shares. Investors invested over EEK 300 million in shares of Premia Foods and Ekspress Grupp.  In addition to foreign investors, a large number of investors were Estonian, indicating an increase in local investors’ confidence in the securities market and the futures of the companies in question. Investors are willing to invest their money into the development of Estonian companies, and hopefully many companies will take advantage of this opportunity.

On  May 5^th, NASDAQ OMX Tallinn registered a new issuer – shares of Premia Foods were listed on the Baltic Mai List. There were 14.5 million on offer, and their equilibrium price was settled at 14 EEK. The total value of the offering was EEK 203 million, and more than 1,350 retail investors participated in the offering.

The secondary public offering of Ekspress Grupp’s shares concluded in early May. At a set price of 13.77 EEK, 8,948,000 new shares were offered to investors, to a total amount of EEK 123.2 million. The offering was over-subscribed by 1.35 times.

The NASDAQ OMX Tallinn index (OMXT), which rose sharply in January and early April of this year, experienced a downturn in mid-April, falling to 519.95 points by the end of June. Compared to the end of the previous quarter, the index has fallen 9.1%; however, it has risen 28.5% since the beginning of the year. Compared to the same date last year, there has been an increase of 73.7%.

Automotive Holding, part of the Autoliv Group, made a takeover bid to acquire all of Norma’s shares at EEK 92.31 per share. The shareholders decided to sell a holding of approximately 42.7%, and Autoliv acquired 93.7% of the shares of Norma. As of July 1^st Norma’s shares are no longer listed on the Stock Exchange.

The share prices of 12 companies fell over the course of the quarter; for five companies – Nordecon International, Ekspress Grupp, Järvevana, Tallinna Vesi ja Arco Vara – by more than 20%. Only the share prices of Silvano Fashion Group and Trigon Property Development rose slightly. The admission of Premia Foods to Tallinn Stock Exchange increased the aggregate market value of publicly traded companies by EEK 34 million; however, Norma’s departure brought it down by nearly EEK 77 million.

In Q2, the price movements of shares were affected by a response to the strong rally in share prices in Q1 but also by the weakness of the international markets, which were not compensated by the listing of a new company.

In Q2, both bonds listed on NASDAQ OMX Tallinn– the bonds of LHV Ilmarise Kinnisvaraportfell and ABC Grupp – were redeemed.

On March 31^st, the membership of SNORAS-Jusu Tarpininkas in NASAQ OMX Tallinn expired; however, as of April 1^st, Reģionālā Investīciju Banka, based in Latvia, is a new member of the exchange.

The EPI index, which reflects the mean performance of funded pension funds, did not change significantly, remaining at almost the same level as in Q1 (137.54 points at the end of Q2). In the middle of 2010, the values of pension funds were 15.61 billion EEK, remaining at the same level as the values in Q1. Compared to the same period last year, the values of pension funds grew by 14%. In Q2 2010, the price movements of pension funds were affected by the fear of a potential new recession and also by a weakening of the international markets due to the threat of Greece’s problems spreading to other countries.

The Estonian Central Register of Securities continues to work actively with public limited liability companies and private limited liability companies to provide information relating to the changeover to the euro. On the www.e-register.ee/euro webpage, the Estonian Central Register of Securities and the NASDAQ OMX Tallinn are consolidating information relating to the changeover to the euro for companies. From July 13^th, calculators for determining and comparing changes in a holding or in share capital as the result of the change in legal tender will be available to companies on this webpage. Also, for companies registered with the Estonian Central Register of Securities, a euro information hotline, at 640 8888, is open from 9 am until 5 pm on weekdays.

All companies registered with the Estonian Central Register of Securities will receive free personal consultations both on the changeover to the euro and on the companies’ securities-related operations – such as an alteration of their capital, an increase/decrease in their shareholder membership, and meeting their obligations that arise upon the changeover to the euro.

Currently, 2,147 private limited companies and 4,529 public limited companies are registered with the Estonian Central Register of Securities.

In spring, the parliament received several draft amendments to legislation on the securities market, the more significant of which include amendments to the Income Tax Act and the Family Law Act. In the latter, the major amendment is the application to children and parents of the concept of the right of guardianship, which obligates a parent to ask for permission from a court when performing transactions on a child’s securities account. In the estimation of NASDAQ OMX Tallinn, parents should be allowed both to open a securities account and an investment account linked thereto for a child and to perform transactions freely on the accounts. This will permit well-intentioned parents to provide for the future of a child, while courts retain the option to keep an eye on the few instances in which a parent handles a child’s estate in a self-seeking manner.

In a positive and long-awaited change, the parliament passed an amendment to the Income Tax Act, which as of next year allows private individuals  to reinvest income received from their investments and to do so without paying income tax on the profit earned. 

More statistics & information here.