More than just a 'correction'

An analysis of the local stock market in a recent issue of one of Malta's pink papers spoke of a "correction" on the Exchange. The definition of a correction, by international standards, is a drop in a market index which exceeds 10%, but does not go beyond a maximum 20%, of the most recent peak.

For example, the Dow Jones peaked this year on May 10 at 11,642.65 when the Federal Reserve raised interest rates to 5%. Its lowest point since was 10,706.14 on June 13 for a drop - or correction - of 8.04%. The Dow has now climbed back above the 11,300 level.

By comparison, the Malta Stock Exchange Index peaked at 6,641.87 on March 28, and closed last Thursday at 5,155.39. The Maltese Index is down 22.4% and therefore beyond the maximum 20% level that would qualify it as a correction.

On July 2, this column's title was the question "Sitting bull or running bear?" The bear, a five-month-old one, is certainly with us - whether running or crawling. The last major bear market ended after 33 months (January 2000 - October 2002).

A review of the four-day trading week up to last Thursday did not reserve any surprises as most equities just plodded along, trading in random spurts of activity. Of the week's total equity turnover by value of Lm706,000, a full 68% (Lm481,000) was traded in Bank of Valletta plc (BOV). Its price however suffered a setback early on in the week and, although off its lows, still closed the week 2.7% lower at Lm3.65. HSBC Bank Malta plc (HSB) was uncharacteristically quiet with turnover of only 32,819 shares for turnover of Lm70,014. It was however, the week's best performer, up 2.3%. The only other positive performer was Malta International Airport plc (MIA), gaining 0.5%. GlobalCapital plc (GCL) led the losers with a drop of 3.7% followed by Maltacom plc with a net loss of 2.2%.

The MSE index was virtually unchanged at 5,155.389, just 0.2% down on the week.

HSB started out in a positive vein on Monday. It had advanced 3c to Lm2.13 within the first 20 minutes of trade. Action dwindled and after a hour-long interruption, HSB crawled back into motion with just a handful of trades, as the price fell to Lm2.11. Tuesday was a near no-show when, with only three and half minutes to the close, a mere six trades materialised, and the price advanced to a week's high of Lm2.15.

HSB dropped a cent to Lm2.14 by Wednesday's close, rising to Lm2.149 during Thursday's half-hearted appearance during which a trivial 1,060 shares changed hands by the time the last deal was carried out at a full one hour 20 minutes before the close of trade. Nonetheless this was still 2.3% up on the week, on a turnover of 32,819 shares for the week.

At the end of trading the best bid was 460 shares at Lm2.14, while the best offer for 2,000 shares stood at Lm2.149.

MIA opened the week optimistically, 2c5 ahead at Lm1.35. The long-awaited Ryanair agreement was announced on Monday evening but had little effect on MIA's share price as it faltered to Lm1.33 by Tuesday's open. It however regained its poise to close at Lm1.35. After a day's silence yesterday, MIA opened a cent down, wobbling further to close at Lm1.331, 1c9 lower on the day but still 0.5% up on the week.

At the close of trading best bids for 7,000 shares started at Lm1.31, while offers for only 65 shares started at Lm1.33.

In, Monday's trading, BOV started where it had left off the previous week at Lm3.75. Selling pressure, however, pulled the price down to Lm3.70 within an hour of the open. A 29-minute intermission followed, before it was jolted back into action. A sale order for more than 50,000 shares was dumped on the market, dragging the price to a low of Lm3.50. On Tuesday, investors treaded gingerly with the first deal taking place 50 minutes into the open. In thin trade, BOV advanced from Lm3.55 to Lm3.65 before falling back to a close of Lm3.601.

Wednesday's first trade was matched at Lm3.65 but the equity then traded in a tight range of Lm3.60 to Lm3.625 for the rest of the session, ending the day at this latter price. Thursday again saw only sporadic trade as BOV advanced to Lm3.65 at which price it closed the day. On the week, on a turnover of 133,442 shares, this was a drop of 10c per share - 2.7% lower.

At the close of trade best bids totalled 800 shares at Lm3.64, while supply for 1610 shares started at Lm3.66.

MLC's only positive session was Monday's when it traded 2c higher at Lm1.84, although on slim volume. It was downhill for the rest of the week: it slipped to Lm1.821 - again on low volume - on Tuesday, tumbling to Lm1.80 on Wednesday under strong selling pressure as nearly 50,000 shares were off-loaded. Thursday's session saw the first two of the day's only four deals carried at Lm1.80, receding to Lm1.78 by the end trade, to close the week nursing a 2.2% fall. With 57,646 shares changing hands the turnover by value at Lm104,020 accounted for 15% of the week's total.

At the end of the session, the best bids were for 3,000 shares at Lm1.75 and the best offers started at 6,104 shares at Lm1.80.

Of the small caps that did trade, GCL suffered the worst loss, falling from Monday's Lm2.151 open to Thursday's Lm2.10 close, a weekly loss of 3.7% on the previous week's close.

International Hotels Investment plc was 1% lower, closing the week at €0.95c while Middlesea Insurance plc suffered a similar drop, 0.8% lower at Lm2.48. Fimbank was practically static, a minimal 0.05% down at US$1.849.

Lombard Bank plc (LOM), Suncrest Hotels plc, Plaza Centres (PZC) and Simonds Farsons Cisk did not trade.

The first three however all issued company announcements: on Monday, LOM announced that Vittorio Vellano resigned from the board of directors with immediate effect.

On Tuesday SCR announced that Michael Sciortino has been appointed a member of the Audit Committee with effect from last September 1, replacing Ivan Fsadni.

On the same day PZC published their half-yearly financial statements for the six months ending June 30. These showed an increase in turnover from Lm308,268 to Lm313,031 - 1.55% over the same period last year. Profits before tax advanced 2% in the same period reaching Lm211,894, while earnings per share stayed put at 1c4. The Alternative Companies List Datatrak plc did not trade.

Turnover by value in the corporate bond market was a threadbare Lm11,600 spread over nine deals in six stocks. The Government bond market was moderately active with 25 deals for a total turnover by value of Lm374,840.

Financial Planning Services Limited is licensed by the MFSA to provide investment services, including stockbroking. The company is involved in acting as sponsoring stockbroker and corporate stockbroker. The directors or related parties, including the company, and their clients, are likely to have an interest in securities mentioned.

Report by Financial Planning Services Ltd., tel: 2134-4244, fax 2134-1202, e-mail matthew@bonellofinancial.com, elaine@bonellofinancial.com