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Baltic Economy
NASDAQ OMX Baltic - Three Countries, One Market

Ott Raidla

NASDAQ OMX Baltic operates three stock exchanges and three central securities depositories in Estonia, Latvia and Lithuania under one Baltic roof, providing the capital market infrastructure across the whole value chain – from listing, trading, and market data to clearing and settlement and safe-keeping of securities.

NASDAQ OMX Baltic exchanges are a part of the world’s largest exchange company NASDAQ OMX, thus ensuring great confidence in Baltic securities market for international investors, offering a market infrastructure in accordance to the international industry standards, world’s fastest trading platform and high listing standards.

The Baltic Market offers a comprehensive, efficient and secure marketplace, regulated to global standards for companies to raise capital and for investors to transact and settle financial products seamlessly between the three countries.

In the recent years, NASDAQ OMX Baltic exchanges have focused on removing frictions to cross-border investments and leveraging on the regional integration. The essential elements of a single Baltic marketplace like shared global technology, one market model, joint membership, common information distribution and other have been put in place, making the region easier accessible and more attractive to local and international investors, as well as companies seeking to list their shares on the stock exchange.

By introducing a single trading and settlement currency as Latvia joins the euro area in January 2014, NASDAQ OMX Baltic will take another step to become a truly integrated market. The single currency across the Baltics will greatly improve the efficiency of the Baltic market and facilitate capturing larger flows of portfolio investments to the region. For foreign investors the common currency will reduce transaction costs through savings in conversion expense, allow for smoother management of cross-border portfolios, as well as diminish trading-related risk.

Baltic tiger is roaring

The Baltic region has demonstrated remarkable agility by quick recovery from the recent economic crisis. Estonia, Latvia and Lithuania have been the fastest growing economies among the 27-member states of the European Union for the last three years. Latvia's GDP in 2012 as compared to 2011 increased by 5.6%, while Estonia's GDP grew by 3.2% and Lithuania's by 3.7%.

During the past 3 years NASDAQ OMX Baltic Benchmark index which is composed of the largest Baltic companies covering different sectors advanced by more than 40%, since the beginning of 2013 the index has grown by 12%.

More opportunities to raise capital

As Baltic economies are steadily growing, so is the capital market. Expanding list of corporate bonds proves that there is a great alternative to bank loans. And this alternative is likely to become more attractive for companies, as the regulations and requirements imposed on bank lending are becoming stricter. There are more and more opportunities for companies to diversify their capital base and attract growth capital using stock exchange instruments.

IPO as a source of attracting capital could be as beneficial for large companies, seeking funding for expansion, as for small and medium size enterprises (SMEs) who cannot access bank loans for various reasons.

As SMEs constitute approximately 99% of all companies in the Baltics, their valuable role in the economies cannot be overestimated. The importance of SMEs has been accurately characterized in a program, which aims to boost the IPO market in Sweden (“IPO White Paper”). The significance of SMEs in Swedish economy has been growing constantly over the recent years. For example, in the last decade about 80% of the new jobs in Sweden were created by the companies with fewer than 50 employees. It seems reasonable to assume that the situation is similar in the Baltics. Taking this into account, it is important to ensure that SMEs and start-ups have the opportunity to get an easy access to capital if they need to.

In addition to the regulated market,  NASDAQ OMX Baltic has an alternative market called First North Baltic. First North is designed specifically for SMEs and start-ups and has much looser regulatory requirements compared to the Main and Secondary lists. Two companies – Baltic Telekom and Telescan – joined NASDAQ OMX Baltic Alternative Market First North in 2013.

The main purpose of the alternative market is to serve as an entrance point to stock exchange for SMEs. Usually, these ambitious companies grow and seek to become the main list companies in the future. The alternative market can boost a company’s visibility and create better conditions for finding investors for further financing.

As a matter of fact, the Swedish IPO White Paper also reveals that the job growth in the companies which went public increased by 36.5% annually during the years following the IPO (by comparison, the average job growth rate in private sector companies in Sweden is 1,5%). This proves a positive link between access to capital by SMEs and job creation.

We believe that what determines success is not how large or small the market is, but instead whether the market is growing or shrinking. As Baltic countries are standing firmly on the path of sustainable economic growth, we believe the IPO and listing trends which we witness all over the world will gain momentum also in the Baltics.

Baltic Market Quick Facts (in a separate box)

79 listed companies
33 members
29 corporate bonds
45 government bonds & bills
5.7 billion euros - market cap
3,265 euros - average transaction
23.92% - increase in the Baltic Benchmark Index y-o-y

OMX Baltic Benchmark GI index (26.11.10-26.11.13) (in a separate box)


10 largest companies by market capitalization

Tallink Grupp (TAL1T) – 643 MEUR
Olympic Entertainment Group (OEG1T) – 283 MEUR
Lietuvos energijos gamyba, AB (LNR1L) – 241 MEUR
Tallinna Vesi (TVEAT) – 226 MEUR
Tallinna Kaubamaja (TKM1T) – 223 MEUR
Lietuvos dujos (LDJ1L) – 185 MEUR
Ventspils nafta (VNF1R) – 145 MEUR
Apranga (APG1L) – 139 MEUR

NASDAQ OMX Baltic Market Awards – honoring excellence in investor relations (in a separate box)

Each year NASDAQ OMX Baltic exchanges identify the best companies in the Baltic market in terms of investor relations and award them during the Baltic Market Awards ceremony.

The Baltic Market Awards project, alongside with evaluating investor relations, identifies the best financial intermediary – a bank or a brokerage company trading in the Baltic company shares – and awards it as Member of the Year.

The Baltic stock exchanges have been carrying on the Baltic Market Awards project since 2006.

Best investor relations in the Baltic countries in 2012 – TEO LT
Best annual report in 2012 – TEO LT
Best investor relations online in 2012 – TEO LT
Most visible improvement in investor relations in 2012 - Latvijas kuģniecība
Member of the year in 2012 – LHV Pank
Overall in the Baltic market, the quality of investor relations of the listed companies has improved by 46% since the first Baltic Market Awards in 2006.


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