2006 - well begun, then gets undone

Neat. Last Friday marked the end of the three-day trading week, the month, the quarter and the year. The difference between the rousing start to 2006 and the hushed, "let's wrap it up" finish, was practically palpable - the sentiment borne out by the statistics.

Equity turnover for the year was an impressive Lm88 million. A quarter by quarter breakdown of this figure gives a clear indication of the ebb and flow (more of the former, latterly) over the whole of 2006.

The MSE index gives the story all the more tangibly: after peaking on March 28 at 6641.873, it closed the first quarter at 6508.656. The inexorable slide continued quarter after quarter, as did the decline in equity turnover values. The combined equity turnover by value of the last three quarters was virtually identical (only Lm577,000 more) than that of the first quarter alone. The MSE index ended the year a full 26.6% off the March all-time high and 2.15% below its December 30, 2005 level.

It was a busy year on the bonus issue and share splits front, with five equities going down that route. Bank of Valletta plc (BOV) was the first with its one for one bonus issue, effective January 18. FIMbank plc (FIM) effected a one for five bonus issue for those on the share register on February 28, while HSBC Bank Malta plc (HSB) offered a three for one bonus issue effective April 19. Lombard Bank plc (LOM) had a one for one share split effective May 12, as did Middlesea Insurance plc (MSI), with effect from June 28.

In terms of performance, the final 'hit parade' sees GlobalCapital plc (GCL) as the top performer, with a stunning increase of 57.1%. The silver went to LOM with a 28.7% gain, while the close-ended investment trust, Santumas Shareholdings plc, took bronze with a 23.5% advance.

Interestingly, GCL ranks ninth by market capitalisation and LOM eighth, with their price earnings ratios reading 18 and 20.4 respectively.

The next five equities to end the year in positive terrain were MSI, up 10%, euro-denominated International Hotel Investments plc (IHI), gaining 9.9%, FIM advancing 7.6% (in US$), while Medserv plc (MDS), only listed on October 23, added 4.6%. Plaza Centres plc (PZC) came in eighth with a 2.9% increase.

It is relevant to note that FIM's performance, when its dollar price is converted into Maltese liri, actually results in a share price drop of 3%.

The large cap stocks all ended in negative territory in 2006: HSB shed 5%, BOV was down a mere 0.27%, and Maltacom plc (MLC) was the wooden spoonist with a drop of 19.5%.

HSB's intra-day all-time high was hit on both April 13 and 17 at Lm3, one day before the allotted bonus shares became tradable. In this regard, we quote from the March 24 issue of Financial Ink, our private circulation newsletter, when HSB had closed at Lm11.60 (Lm2.90 post-bonus issue)

"Do you remember when you were a teenager in a dance hall, and by the time you had plucked up the courage to ask the girl you had been eyeing all evening for a dance, the music would stop within seconds of her saying yes? Why do I get this funny feeling that a lot of people are finally asking to buy shares when the music is about to stop?...

"...is it a possibility that HSBC lager will froth till it hits Lm12, say round about April 18, to make for a very neat post-bonus issue price of Lm3? But from April 19, when the froth has blown away, at what level will the beer itself be?"

The answer to that question is - to date - the year's closing low of Lm1.90, hit last Friday, making it a drop of 36.7% from the all-time high.

During the year BOV climbed to an intra day peak, on February 28, at Lm5.175 and hit its year's low of Lm3.50 on three occasions, before closing the year at Lm3.70.

MLC hit its year's high on March 28 at Lm2.25 and closed the year at Lm1.49, 4c higher than the year's lowest point. In May, MLC was fully privatised at Lm1.554.

Malta International Airport plc (MIA), the fourth largest cap, peaked at Lm1.60 on February 3, dived to its low for the year on September 1 at Lm1.325 and has since climbed back to close the year at Lm1.37. Overall, a year-on-year drop of 11.6%.

Now for a brief overview of the year's last three-day trading week: Volume was relatively good at Lm709,831.

BOV started Wednesday at Lm3.57, falling to a low of Lm3.55. The price ping-ponged at this level for all of Thursday at which it looked set to close the year, till a last minute window dressing move swept up a number of sale orders between Lm3.58 and Lm3.70 in the final 90 seconds of trade, so that BOV closed the week 3.35% ahead. Turnover for the week totalled 24,981 shares for a market value of Lm89,329. At the end of the session best bids for 403 shares started at Lm3.552 while the best offer for 3,500 shares at Lm3.70.

HSB continued to slide, falling from Lm1.94 to Lm1.92 on Wednesday, closing at Lm1.91 on Thursday, slipping to Lm1.90 on Friday to end the year at its lowest point. Volume for the week was a heavy 159,239 shares for a market turnover of Lm304,493 - 43% of the market's total turnover by value. At the close of trading, demand for 1,500 shares stood at Lm1.88 while supply for 161 shares started at Lm1.91.

MLC only traded on Wednesday and Thursday, advancing to Lm1.47 and Lm1.49 respectively to close the week 1.4% up with 9,600 shares changing hands for a value of Lm14,068. MIA was only active on Thursday, up 2.6% to Lm1.37 on turnover of 3,829 shares.

The best performance however came from small cap stocks; LOM was the star performer, clocking up an impressive 7.7% to Lm5.76. This equity was active on Thursday, climbing from a Lm5.30 open to a Lm5.50 close. On Friday, a last minute buy order saw the price zoom from a Lm5.495 open to a Lm5.76 close. The board announced on Friday that it will meet on March 8 to consider and approve the group's financial statements for the year ended December 31, 2006.

GCL gained 4.7% rising from a week's open of Lm2.10 to Friday's close of Lm2.20.

FIM gained 3US$c to US$1.73. Volume was a respectable 77,575 shares for a value of Lm43,384. PZC rose 2 cents to 70c while MDS gained a cent to Lm1.36 in the week's only deal for 1,000 shares. Simonds Farsons Cisk shed 1c9 to close the year at 80c. MSI was static at Lm1.98 in two deals for 2384 shares as was IHI, flat at €1.

Our parting thought is: "the deeper the market goes, the safer it is". The time to buy equities is when it hurts the most. You must act when you don't want to. Here's to a happier 2007. We wish all our readers a happy, healthy and prosperous New Year!

Financial Planning Services Limited is licensed by the MFSA to provide investment services, including stockbroking (IS/3608). 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.