HEX Paves the Way for Baltic Capital Markets

Rapid economic growth in the Baltic region has boosted the Estonian and Latvian securities markets. HEX has helped pave the way in developing Tallinn and Riga stock exchanges into modern capital markets, says HEX's President and CEO Jukka Ruuska.

Over the past year and a half the HEX Group has been making its way into the Baltics. HEX acquired a 61,6 per cent majority shareholding in the Tallinn Stock Exchange (now HEX Tallinn) in the spring 2001 and 92,98 per cent of the Riga Stock Exchange (RSE) last summer. The Group also boasts a majority shareholding in the central securities depositories of both Estonia and Latvia.

"Our goal is to create marketplaces for the leading Baltic companies. In the long run we are also aiming towards a unified Baltic capital market," explains Jukka Ruuska.

"We offer a reliable and effective framework for developing securities trading. Once the technology, administration and legislation necessary for securities trading are prepared, the Baltic countries will give origin to a liquid and transparent marketplace that promises to attract the trust and interest of investors around the world."

Forthcoming EU membership will also stir interest in the Baltic countries. Country risk, which is already being reduced, is expected to continue its decline. In Estonia, for example, the new securities market act that came into effect at the beginning of this year has already brought the country's legislation on securities trading closer to European regulations.

The organisational structure of the Estonian and Latvian marketplaces is similar to that in place already in Finland. "Now we have an excellent opportunity to provide a similar range of services in the Baltic countries. Issuers, investors and brokers in Estonia and Latvia are being offered the whole chain of HEX securities trading services, such as trading, clearing and settlement, custodial services and registration."

According to Ruuska, companies, investors and brokers have reacted positively to HEX's stakes in the Tallinn and Riga stock exchanges. In the Baltic countries investing is still at the development stage and the markets are seeking active players. HEX's comprehensive network of brokers and market information vendors will surely boost the liquidity of these markets.

"Shares listed on the Tallinn Stock Exchange are currently included in the HEX trading system with shares on the Riga Exchange soon to follow. This means HEX’s numerous local and remote members will also be able to trade on the Estonian and Latvian markets."

The stock exchanges in the Baltic States opened soon after the countries gained independence about ten years ago. The Tallinn Stock Exchange has 17 listed companies and the Riga Stock Exchange 63 Last year their share turnovers were 262,7 euros and 887,9million euros respectively, figures equivalent to only a few days' turnover at Helsinki Exchanges.

"Nevertheless, Tallinn and Riga marketplaces are experiencing rapid growth along with their countries’ economies. Healthy economic development and companies that provoke interest are key factors in stimulating investment," Ruuska points out.

Aside from increased liquidity of the stock exchanges, HEX’s Baltic acquisitions are expected to provide additional listings on the markets.

"The main driver behind Estonia's rapid economic growth has been the establishment of foreign subsidiaries in the country, but domestic companies have also pulled some share of the weight. The stock exchange promotes companies access to capital, and we are confident that in due time there will be plenty of new listings and interesting companies in the Baltic area."

Acquisition of the Baltic stock exchanges is consistent with HEX's overall strategy, which is to seek additional growth and profitability through internationalization.

"By developing the Baltic capital markets, we are attracting widespread interest to them. Now in addition to Helsinki, we can market Tallinn and Riga as marketplaces. According to European standards, HEX is a marketplace with exceptional networks."

If HEX continues to make headway in the Baltic States and has plans to integrate the whole region into a single marketplace, Lithuania still remains outside of the HEX fold.

"Of course we would like to discuss the matter with the Vilnius Stock Exchange, and we have also taken a closer view in other neighbouring countries' stock exchanges, namely the ones in Warsaw and in St Petersburg."

Ruuska believes that there will be further integration and collaboration between European stock exchanges over the next few years, and expects HEX to be an active and open-minded part of that process.

"We have proven our expertise in our own market area. I am confident that our operations in the Baltics will strengthen our position for future developments."

Website: http://www.hex.com/

Text: Hannu Virtanen/Sanoma Magazines Finland.

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