Although the last five years have been turbulent to say the least, and not all factors have fostered market growth, despite the difficulties, domestic capital market activity in this period has generally been positive.
Since 2018, the domestic capital market has lost several significant issuers, including major Latvian companies like Olainfarm, Grindeks, and Latvijas Gāze. This trend has had a major impact on the total stock market capitalization, which has now contracted by almost half. Compared to 2018, the number of stock issuers available on the exchange has fallen by nearly 50%. Meanwhile, despite experiencing some volatility during the pandemic, the bond segment has maintained a stable long term offering.
Growing media activity reflects increased public interest and awareness of the domestic capital market. In considerable part, this is due to discussions about the possible listing of state-owned companies on the stock exchange.
The key positive force driving the index's growth comes is investors. Since 2018, in euro terms, investment volume has risen by 55%, while the number of transactions has more than quadrupled. This reflects a rapid increase in the involvement of small investors and improved financial literacy among the public as a whole. Undoubtedly, the listing of well-known brands such as Virši, Grenardi, Eco Baltia, DelfinGroup, Eleving Group, APF Holdings, Indexo, etc., has generated considerable interest. These issuers foster an emotional and practical connection with consumers, which prompts them to become shareholders.
Barometer Methodology
Capital Market Activity Barometer indicators are divided into three large categories:
Investor Activity
This category has two indicators: the total turnover of the Nasdaq Riga Stock and Bond Market and the volume of transactions. Market turnover is indicative of the volume of money circulating within the domestic capital market. In other words, it indicates whether investments in the market are growing or, on the contrary, money is flowing out of the market. Furthermore, the volume of transactions in this context accurately reflects the activity of smaller investors (retail investors) in the market, illustrating the nature of the market's investor base and the general popularity of the capital market within society. A growing number of small investors provides several benefits – a healthy proportion reinforces market liquidity and efficiency, while also reducing the bid-ask spread.
Media Activity
This category has two indicators: the number of media articles and audience size. The selection of articles is based on a keyword identification method. The data is compiled by the national news agency LETA, selecting articles that include the following keywords: capital market, bonds, Nasdaq Riga, stock exchange listing, IPO, share issue. Media activity and audience size reflect overall public awareness of events in the domestic capital market.
Market Volume
This category has four indicators: total capitalization and the number of listed stock issuers on Nasdaq Riga, as well as total capitalization and the number of listed bond issuers. This category reflects how actively companies are using the domestic capital market to attract funds, as well as the size of the issuers, illuminating the market offering for investors. This is a vital precondition for attracting investors.
