Latvia Launches First Capital Market Activity Indicator
Signet Bank, Latvia's leading investment institution, in partnership with the national information agency LETA, have unveiled the Latvian Capital Market Activity Barometer. This innovative analytical tool is the first of its kind in Latvia, systematically collecting and analyzing data on capital market development from 2018 to 2024.
The Barometer encompasses three vital indicators of capital market activity: investor activity, market size, and media intensity. By merging these components, it offers a multifaceted understanding of market growth, roadblocks, and future potential. The Barometer will undergo annual updates, allowing for comparison and insight into the trajectory of Latvia's capital market expansion.
Roberts Idelsons, Chairman of the Board of Signet Bank, expressed his vision, stating, "Latvia has reached considerable progress in its capital market. Foundations have been strengthened, and opportunities for both local businesses and investors have emerged. However, long-term growth necessitates continuous advancement. The Latvian Capital Market Activity Barometer helps to gauge this progress, identifying challenges and aiding in the making of sustainable decisions that foster growth, not only in business but also at the national level."
According to a recent survey conducted by Mindshare Latvia on behalf of Signet Bank, awareness among businesses regarding capital market opportunities stands at 51%, a significant increase from 29% in 2021 and 43% in 2023. Yet, 31% of respondents admitted to a lack of knowledge, demonstrating a need for further financial education. The main obstacles preventing entrepreneurs from utilizing the capital market for financing remain a combination of administrative burdens, lack of knowledge, and reluctance to go public.
Although state support mechanisms remain the preferred financing choice among entrepreneurs, there has been a slow yet steady increase in interest in capital market instruments. The limited number of quality issuers and the absence of major institutional actors continue to stymie overall market depth and liquidity.
Investor interest in the local capital market continues to grow, with a 55% increase in investment volumes on Nasdaq Riga since 2018 and more than quadrupled transactions, primarily driven by the growth of small investors. However, the market still lacks large, high-quality companies willing to list publicly, hindering investment opportunities.
Valters Smiltāns, an Investment Analyst at Signet Bank, emphasized, "Investor interest in the local capital market is growing healthily, but options remain limited. The listing of large, reputable companies would significantly activate institutional investors and make the market more attractive to retail investors, enhancing overall activity."
A media monitoring study by LETA reveals a growing interest and coverage of capital market topics, reaching a potential audience of 370 million in 2024. This indicates that the capital market is becoming a more prominent issue in the media spheres, contributing to a maturing public opinion on the subject. However, while coverage is expanding, in-depth analysis and feedback on real results are still lacking.
Ivars Svilāns, Head of Data Services Development at LETA, commented, "Despite the more than 12,000 mentions of capital market-related topics, their content largely remains informative rather than experience-based. This suggests that the public's perception of the capital market is still evolving, with interest growing but consistent, positive action taking longer to materialize."
The Capital Market Activity Barometer serves as a critical step towards systematically examining the capital market and informing strategic decisions based on empirical data. Change, however, relies on people. The Latvian capital market boasts investors interested in growth, companies with ambition, and the political will to drive change. The only question that remains is whether Latvia will seize the opportunities available to foster a thriving, dynamic capital market.
Further details and analysis can be found on the Signet Bank Latvian Capital Market Activity Barometer, available at https://kapitalatirgus.lv/.
Enrichment Data Analysis:- Limited supply of quality issuers: Despite the increase in investor activity, the stock exchange has a shortage of large, reputable companies willing to list publicly, limiting investment options and impeding growth.- Absence of major institutional actors: The current market situation does not adequately attract institutional investors due to a lack of sizable, transparent issuers, hampering overall market depth and liquidity.- Dependence on public and financial sector involvement: Sustained growth requires ongoing commitment from both the state and the financial sector to cultivate a more robust capital market ecosystem.- Growing investor confidence: The volume of investments on Nasdaq Riga has increased significantly since 2018, driven by small investors' growing interest and confidence.- Potential for market activation: Listing more large, reputable companies could resonate with institutional investors and become more appealing to retail investors, boosting overall activity.- Positive market indicators: A growing number of companies with good brand recognition, transparency, and growth aspirations (such as Virši, DelfinGroup, Grenardi Group, CleanR Group, Eleving Group) are capturing the interest of investors.- Maturing public opinion and media coverage: there is evidence of a maturing public attitude towards capital markets, which can help promote further developments.- External support: EU and domestic initiatives, such as the Baltic companies credit boost, may bolster investment and market expansion efforts.
- Roberts Idelsons, Chairman of the Board of Signet Bank, believes that the growth of Latvia's capital market requires continuous advancement and emphasizes the importance of the Latvian Capital Market Activity Barometer in helping to gauge this progress, identifying challenges, and aiding in the making of sustainable decisions that foster growth.
- Valters Smiltāns, an Investment Analyst at Signet Bank, highlights that while investor interest in the local capital market is growing healthily, options remain limited, and the listing of large, reputable companies would significantly activate institutional investors and make the market more attractive to retail investors, enhancing overall activity.
- According to Ivars Svilāns, Head of Data Services Development at LETA, despite the more than 12,000 mentions of capital market-related topics, their content largely remains informative rather than experience-based, suggesting that the public's perception of the capital market is still evolving, with interest growing but consistent, positive action taking longer to materialize.
