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Baltic States: Capital Markets To Sign Cooperation Accord

By Monika Garbaciauskaite and Breffni O'Rourke

Vilnius, 29 September 1997 (RFE/RL) -- Tomorrow marks an important day for the stock exchanges of the three Baltic states in that officials from each are to sign a letter of intent aimed at increasing mutual cooperation.

Lithuanian Stock Exchange Commission Chairman Virgilijus Poderys says steps towards integration are necessary because at present the individual Baltic stock markets are too small to attract large-scale foreign investors.

Envisaged are a series of small cooperative moves on the road to possible full unification. These are things like the holding of regular meetings of the three stock market supervisory institutions, the common training of supervisory officials, joint sources of financing and pooling of expert advice, and moves towards harmonisation of regulations to European Union norms. In addition, issues like compatibility of stock exchange trading systems and the safety of computer networks are to be studied.

These may seem modest first steps towards integration, but they are not without their difficulties and tension. On purely technical grounds, there are marked differences in the trading techniques of the Lithuanian exchange compared to Estonia, and to a lesser extent Latvia. For instance the Lithuanians set prices once a day, the Latvians several times, and the Estonians throughout the day. The Lithuanians plan to quicken their pace and will adopt the Latvian system soon.

More important than the technical details, however, is the level of friction evident particularly between Lithuanians and Estonians. Lithuanian brokers complain that Estonian intermediaries and bankers often criticise the Lithuanian market in unneccessarily harsh terms. Stock Exchange Commission Chairman Poderys agreed with this in comments to RFE/RL. He said Estonian specialists depict the Lithuanian market in the darkest colours, while continuing to invest in it. He suggested that the Estonians might be trying to drive down prices on the Vilnius stock exchange.

And he expresses some doubts about the way the Estonian market regulates itself. He says the Lithuanains are quick to reveal any of their problems, while the Estonians prefer to hear praise.

Similar comments came recently from Lithuanian Stock Exchange Director Rimanatas Busila. He said that by attempting to discredit the success of Latvia and Lithuania, the Estonians were harming their own economic development, in that potential Western investors tended to view the Baltics as a unified region.

Estonian analysts and officials don't appear ruffled by such criticism. Leading Estonian market analyst Villu Zernast told RFE/RL from Tallinn today that the misunderstandings with the Lithuanians stem partly from the different way the stock exchanges of the two countries work. He said Estonian dealers don't like Vilnius's organisation or trading system, and they don't find that the market there offers enough liquidity.

Further, Zernask said the Lithuanians are scared of losing business to the Estonians. He notes that many foreign investors come to the Baltic market first through Estonian brokerages. But he says he does not believe that the problems between the two neighbours should be blown out of proportion.

The head of the Estonian Stock Market, Helo Meigas, told RFE/RL today that any criticism from the Lithuanian side must be taken very seriously. She said she did not have the necessary information on Poderys's comments to address them. But she said that speaking for the Estonian Stock Exchange, she felt the institution has made remarkable progress in its 15-month existence, and had particularly worked to make available the fullest possible information on quoted companies.

Among the Baltic states, the European Union's Executive Commission has singled out Estonia as a recommended partner for talks on first-wave admission to the EU.