It was a tough year undoubtedly, but Baltic stock market investors ought to be happy and thankful for getting richer towards the end of the year. Despite the global healthcare collision, economic setback and the Baltic market record daily decline of 10.2% on March 12, the OMX Baltic index reached a new record value in 2020.
Now, as a rush of the year inevitably subsides and windows start glowing from Christmas lights, it’s time to sit back and relax, while we guide you through the most attention-deserving events on the Baltic stock market in 2020. Instead of a Christmas carol playlist, we traditionally create a Baltic market playlist to ‘spice’ our nominations of the year. Turn up the volume and enjoy!
Investor’s best friends
LHV and Swedbank brokerages eliminated commissions for trading on the Baltic stock market, attracting more people and more funds to locally quoted companies. The volumes and the number of trades skyrocketed in 2020 as a result. The buoyant activity was also helped by increased volatility both on Baltic and global stock markets. Let’s keep our fingers crossed for the liquidity of Baltic equities to increase even further, therefore attracting larger field players.
Baltic main list trading volumes
Source: Alphinox Quality AS
Mood-setting theme song: We’re Going To Be Friends by The White Stripes
The scandal of the year
Drastic beginning of 2020 was experienced by Grigeo and its shareholders, who saw a 30% decline in share price in January as wastewater damage caused by the company was uncovered. The primary allegation was that Grigeo’s wastewaters came into Curonian lagoon in Klaipeda, thus causing extremely severe damage to the eco-system. The issue was particularly acute in the current environment when everyone is obsessed with the ESG topic. Now, in December, the company published the results of international experts’ evaluation, stating that Grigeo’s fault is limited and the scope of damage done to the fish or zooplankton was insignificant. A 12’500-page long report was submitted to the institutions responsible for this investigation. We continue to follow how the situation unfolds and what sanctions will be imposed on the company, but the whole story once again proves the importance of the ESG factor, both for the management and for the shareholders.
Mood-setting theme song: Scandal by Queen
Going public, again? And another record!
Last year ESO and Ignitis gamyba said farewell to the stock exchange, but here they are again, making the largest IPO Baltic exchanges have ever seen. Lithuanian energy behemoth Ignitis Grupe attracted EUR 470mn, which is 80% of the maximum sum they have planned to raise. The majority was provided by the institutional investors, but also private investors from Baltics (4691 in LT, 300 in LV, and 1836 in EST) actively participated in the funding of the company. Dividend policy, transparency, and stability of Ignitis Groupe were evidently the major factors that appealed to long-term investors. However, the very beginning of trading was not a very successful one as the stock lost 12% during the first trading month vs. IPO price (you weren’t expecting equivalent to an Airbnb IPO with doubling stock price on the first trading day, were you?). Now the volatility declined and most probably will stay there until the next financial results are published. Obviously, this IPO is an extremely positive event that increases the overall liquidity of Baltic stock exchanges and attracts international investors.
Mood-setting theme song: Dynamite by BTS
Sufferers of the year
Though this is quite a sad nomination, we could not skip it because of its importance. We also wanted to praise companies for certain stoicism, which they demonstrated in their struggle to deal with the consequences of the coronavirus pandemic. There are two laureates of this award, both of which have been severely affected by exogenous events. First is Tallink, which, owing to a better diversification, managed to somewhat curtail its losses with a 50% decline in turnover. The second is Novaturas, and this company fared much worse with a 78% decline in sales and one-third of its market value wiped out.
Mood-setting theme song: Survivor by Destiny’s Child
Adieu to Grindeks
This was only a question of time when Grindeks will initiate the delisting procedure when the controlling family increased its holding to 94%. And now, here it comes – the shareholders have casted a vote for the family to take it private and delist the company from the public market. Looking back into the history of share performance, just the last two years were accretive to wealth as when the news about mandatory share repurchase offer came out, it created a lucrative possibility for the shareholders to exit their position in Grindeks. But prior to this event, for over more than a decade, there wasn’t really much value created for the shareholders.
However, it can’t be ignored that it is a loss for the Latvian equity market with regards to the capitalization as Grindeks is the largest Latvian traded company with a market cap of over EUR 130 mn.
Mood-setting theme song: Bye Bye Bye by NSYNC
Best cost controller
Unexpectedly Silvano breaks into the top to win the ‘best cost controller’ nomination. Strict cost discipline for suffering lingerie business is of the utmost importance. Lingerie is certainly not the first thing people would rush to buy during or immediately after the lockdowns, making it a rather cyclical product. Also, the restrictions on face-to-face meetings certainly decreased the amount of romance-seeking activities and, therefore the need for a new stylish bra. Sales of Silvano decreased by 33% this year, but the company managed to press down the cost of sales by 47%. Additionally, it was successful in cutting distribution and administrative expenses, by 25% and 16% respectively. Given that these items are regarded as fixed costs, it can be considered as a good achievement, especially because not many companies were flexible enough to successfully address their own cost base when a crisis environment loomed.
Mood-setting theme song: Money, Money, Money by ABBA
A new leader in Estonia
This year we have witnessed new records globally in terms of capitalization as cheap money was flooding the markets. Apple became the first company in the world to reach the size of USD 2 trillion, while Tesla recorded an astounding run in its market cap, from USD 81 bn in the beginning of 2020 towards USD 650 bn at the end of the year. On the Estonian stock market, there was also a market cap related rotation as Tallink, the share price of which declined by 25%, gave up its long-term market cap leader position to LHV, which recorded a fantastic, almost 60%, performance this year.
Mood-setting theme song: All About That Bass by Meghan Trainor
That’s how we saw the year 2020 events! Thank you for trading and reading! Happy holidays!
Alphinox is part of an independent asset management group with expertise in capital management operating in accordance with Quality investment style. By combining investment expertise and long-term experience in analyzing global financial markets, Alphinox develops customized investment solutions and provides analytical research.
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