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Lithuania: Securities Market Promises Stable Gains

By Rasa Drazdauskiene

Vilnius, 18 February 1997 (RFE/RL) -- The Lithuanian securities market now appears set on a course of stable gains following a wild start to the year, with soaring prices and demand exceeding supply.

January's trading, fuelled by a surge in foreign and domestic investor interest, saw huge, unexpected profits made but it has left in its wake some potential problems for unwary investors.

"The January boom was only to be expected, looking at the securities market results of the end of last year" says Tomas Andrejauskas, sales and trading manager at the securities brokerage house Suprema. "Similar booms have happened in all Eastern European countries, so we were expecting it in Lithuania, it was just a question of time", he said.

An RFE/RL correspondent in Vilnius reports that during January, many company share prices suddenly rose by the maximum margin allowed by the country's National Securities Exchange, namely 20 percent. Suprema weekly reviews of the market show that many new investors, both from home and abroad, joined the market, and many established investors traded their equities for shares.

In Lithuania, like in most Eastern European countries, the main bulk of capital comes to the market from outside. "Foreign investors are the ones who order the music, so surely they have biggest influence in the securities market," says Aidas Galubickas, Suprema's managing director.

Foreigners are typically attracted by a growing market and by a wide variety of shareholding companies. "First of all it is the positively developing Lithuanian economy that attracts them," explains Tomas Andrejauskas.

He notes growth in gross national product in 1996 reached 3.6 percent instead of the expected 2 percent, and inflation was only 12 percent, instead of the expected 25 percent. In addition, market variety is provided by a long list of big shareholding companies, such as Sanitas pharmaceuticals, the shipbuilding yard Baltijos Laivu Statykla, the dairy Rokiskio Suris or the Hermis and Vilnius banks. That all adds up to making Lithuania this year a more attractive proposition to foreign investors.

The Lithuanian securities market has been attracting capital from Northern Europe, mainly Scandinavian countries and Estonia. But the biggest international investors have been holding back, still pondering the possibilities of investments in Lithuania, says Kestutis Kupsys, broker at the securities brokerage house Mendes Prior Europe. "We are not expecting such enormous price increases in the securities market as we had this January", says Kupsys, "but present securities prices haven't reached their peak yet."

Last year - following the big bank crash - was not a very successful time for Lithuanian companies, and for the country's economy in general. Our correspondent reports that even so, towards the end of the year some companies began to show tendencies to earn profits; those tendencies are acquiring speed now, which means that the companies' shares will slowly increase in price.

According to independent financial expert Margarita Starkeviciute, there are even more profitable companies in Lithuania than the trading lists show. But the biggest problem for buyers now is to make sure that increases in companies' share prices really reflect the companies' development, and are not solely results of the January boom.

Beyond that problem, which will eventually resolve itself, most financial analysts see the Lithuanian securities market as heading into a period in which it will offer clients small but steady gains rather than spectacular but unpredictable profits.

"Yes, this is definitely a beginning of a new kind of market, where the shares' prices reflect their real worth and are not artificially inflated by speculation," says Tomas Andrejauskas. His opinion is shared by most experts.