2021 is coming to an end and, we believe, the majority of investors celebrate a successful and profit-brining year (thank you, Jerome Powell š). Baltic markets managed to reach all-time highs many times during the year, mirroring other global stock markets and even beating them. So, now it is time to harvest the results, enjoy and relax.
Christmas lanterns are on, making it all look bright and joyful both outside and inside as we approach Christmas Eve. This means the time has come for you to turn the volume up for the Baltic stock market playlist, when we guide you through our directory of nominations review based on the most attention-deserving events that have happened on Baltic stocks markets over the course of the year.
1. Investorās best friends
It seems we are on a good track to solve āthe chicken or the eggā problem, when investors lack potential investment options, while companies not seeing sufficient investor pool have low motivation to be listed.
2021 was obviously a very busy year for stock exchanges, the homepages of which featured fresh photos from Times Square with the new stock or bond issuer almost every week. This created an excellent choice and opportunity for Baltic investors to allocate their capital, simultaneously supporting local economies. Modera, Hepsor, Enefit Green, DelfinGroup, VirÅ”i, Elmo Rent, Bercman Technologies, TextMagic, Hagen Bikes ā all started their listed journey this year, cumulatively attracting EUR 208 mn in capital. It is also worth mentioning that the majority of IPOs were successful, unlike many global cases, setting good examples for the potential candidates of the future.
Such unprecedented activity has increased the number of retail investors and lifted trading volume, continuing the trend of previous years, when the commissions for trading Baltic stocks were eliminated by few brokerages.
2. Plead for capital
Not only new companies attracted capital via stock exchanges this year, but also the ones, whose operational activities were tangibly hit by pandemics, weighting substantially on their liquidity position. Tallink and Arco Vara were among the ones attracting additional equity capital and piling their liquidity reserves to continue standing firmly. LHV joined them by attracting EUR 25 mn to fund its active expansion. Ā The public offerings were quite successful, and the companies were able to fulfil their ambitions about additional capital, proving that presence on a stock exchange can be very beneficial also during the period when capital is required.
3. Another record
We are spoiled with records coming from the Baltic stoŃk exchnages over the last few years. In autumn 2020 we saw the largest IPO ever, when Ignitis raised EUR 450 mn. This year another energy giant, renewable energy producer Enefit Green, went public and attracted a record high number of retail investors – over 60 thousands- as no company was able to engage more than 20K before. Obviously, this is an excellent trend as retail investors usually are the ones creating liquidity and moving the market, therefore further stimulating the development of capital markets eco-system in Baltics.
4. Shock of the year
We could not skip the historical events happening in Estonia, when pension system 2nd pillar was made voluntary, when every participant is assigned a right to manage his own money. One should probably admit that this is how the things should be once the population has achieved substantial level of financial literacy and accumulated experience in saving and investing through several generations. This, however, does not reflect the state of affairs in Estonia and the results of the reform, perhaps, would not be surprising as there would be a strong temptation for a many to spend their lifesavings. Luckily, many also invested in the Baltic listed companies, which provided a great tailwind for Baltic exchange and sent the benchmarks to the new heights.
5. Topic of the year
Last year the number one topic among investors was, obviously, the survival of companies during the global pandemics, which forced lockdowns and massive value chain disruptions. This year, somehow, the majority got used to the idea, while businesses learned how to survive or even thrive during numerous COVID-waves. Therefore, as a the Top Actor in the theatre of 2021 we nominate ESG topic that has been actively pushed by the regulations, financial sector and investors. Now the companies seem to really start acknowledging the importance of sustainability, making room for ESG sections in their annual reports or even preparing separate reports, and taking firm steps towards achievement of their ESG goals. Ignitis and Enefit are adding to the renewable energy capacity, Auga Group is setting the benchmarks for sustainable food production by having developed worldās first hybrid biomethane and electric tractor.
6. Adieu toā¦
Another pharmaceutical mastodont, Olainfarm from Latvia, has quit Riga Stock Exchange (last year it was Grindex). This was quite logical step for the company, which fell the victim to the ball of crowns involving heirs of the previous owners, foreign as well as local investors, with each party being eager to grab a piece of profits. Perhaps, the company with such a weak Corporate governance is not welcomed by the investors and, therefore, delisting is a positive move. Nevertheless, it deprives market participants the opportunity to invest in generics manufacturer with established market position and good operational processes, which was able to survive even during the shareholders wars.
7. Scandal of the year
Uncovering of a cartel case in construction industry has shaken up media space this summer, but perhaps less so in Estonia and Lithuania than in Latvia. Latvian Competition Council accused Latvian subsidiary of Merko Ehitus of the involvement in the anti-competitive activities during the years of 2015-2019 and has imposed a fine of EUR 2.7 mn as a result. Worth to notice that the news were virtually neglected by the market, with share price down by mere ~2% on the day when the company made the announcement.
8. Year of banking sector?Ā
Concluding our list of Top Events this year, we could not skip mentioning the best performers, which astonished market participants with extraordinary returns. Financial industry has taken up the lead: Coop Pank +144%, LHV +109%, Å iaulių bankas +49%. To compare, global financial industry also performed well this year delivering 26%, while benchmark was up 19%. Banksā management has benefitted from the positive market sentiment and investorsā grace, supported by the development in corporate fundamentals when attracting additional capital via stock exchanges this year: Coop Pank attracted EUR 10 mn and Å iaulių bankas – EUR 75 mn through bond issue, LHV – EUR 25 mn via additional public offering.
It was a good year, canāt agree moreā¦ Thank you for investing and reading! Looking into the future, stay patient, humble and grateful! Ā Happy holidays!
Alphinox Team
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About Alphinox
Alphinox is part of an independent asset manager 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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