Do gentlemen still prefer bonds?

Yes, we know that the heading should read "blondes". As in when an immovable bachelor finally succumbed, and cautiously proposed to the irresistible, high-spending blonde, adding: "But, can you live on my income?" She replied, "Yes, but what will you live on?"

Investors, especially retirees, prefer bonds because they provide a regular source of income without the volatility attached to equities. Much more of a "regular good night's sleep" than shares. It is taken for granted that proper advice, from competent and impartial sources, is sought about the credit rating of any bonds purchased.

This notwithstanding, interest rate decisions by central banks will always impact on bond prices. Holders of local Malta Government stocks have seen bond prices decline, as the Central Bank of Malta's central intervention interest rate increased.

In a period of rising interest rates, the shorter the maturity of a bond the better, because repayment at par will be relatively imminent, and one would benefit from a higher coupon rate when the current issue is rolled over.

Conversely, the longer the maturity, the steeper the decline. Holders of such long dated stocks, while assessing how near to the peak the current interest rate cycle is, have two options:

a) if the objective is regular income, and there is no need for a call on capital - hang on; or

b) if further interest rate increases are expected, with a possible need to call on capital, sell now, stay liquid and reinvest when the interest rate cycle peaks.

But how do you establish the peak of an interest rate cycle? In 1907 - a century ago - an economics professor at Yale University, Irving Fischer, demonstrated that the "real rate of return on money never exceeds 3%" - and anything in excess of that figure is either: 1) a reward for increased risk; or 2) a return on inflation, rather than an investment return on the money itself.

We thought we'd highlight the bond market, for a change. So what happened to the local equities market in the four-day trading week?

The MSE Index closed at 4,802.22, 1.5% down for the week, with 319,918 shares traded for a total equity turnover value of Lm389,401.

Bank of Valletta plc (BOV) enjoyed a positive start to the week, opening 2c higher at Lm3.62. It advanced to Lm3.63, closing at this level on turnover of 6,452 shares.

Tuesday, although a slow session, saw all the five deals effected at different prices in a range of Lm3.61 to Lm3.635, closing at the latter price; Wednesday was practically static with trades between Lm3.634 and Lm3.635.

On Friday, the busiest session of the week, a total of 8,118 shares were traded between Lm3.626 and Lm3.64, with BOV closing at the latter price to end the week 1.11% ahead.

A total of 18,928 shares were traded for a turnover value of Lm68,699. At the end of the week total bids for 975 shares were at Lm3.63, whereas offers of 4,516 shares started at Lm3.64.

HSBC Bank Malta plc (HSB) was barely present on Monday, opening unchanged at Lm1.929 to falter slightly to Lm1.92 on turnover of a mere 1,614 shares. Volume was more substantial on Tuesday with just over 19,100 shares traded at Lm1.921 and Lm1.92.

HSB fell back to Lm1.901 on Wednesday as sales pressure weighed the equity down. On Friday it started ahead, with the first deal struck at Lm1.92 but shed 1c by the end of the session to close the day and the week at Lm1.91.

A total of 58,388 shares changed hands last week for a total value of Lm111,795, with the price dropping 0.98% for the week. At the end of trading, bids for 2,000 shares were at Lm1.906, and the best offer for 2,440 shares stood at Lm1.91.

Maltacom plc (MLC) opened the week a whisker lower at Lm1.438. However, active buying pushed the price higher, hitting an intra day peak of Lm1.46 to close just slightly lower at Lm1.458. The day's turnover amounted to 19,293 shares.

Tuesday, on the other hand, saw just one deal for 5,000 shares effected at Lm1.454. There was no trade on Wednesday. Friday saw only 500 shares changing hands at Lm1.449 for MLC to close the week 1c ahead.

Turnover for the week totalled 24,793 shares, with a total value of Lm35,881. At the end of trading, best bids totalled 2,000 shares at Lm1.405, with a supply of 180 shares at Lm1.44.

Malta International Airport plc (MIA) first traded on Wednesday, dropping 5 mils to Lm1.375 in the opening trades, but regained the Lm1.38 mark to close unchanged. It retained this price for Friday's sole deal of 450 shares.

Last week 2,950 shares were traded for a turnover by value of Lm4,059 with the price remaining stable. At the end of the session, best bids were for 3,000 shares at Lm1.345, and offers for 1,000 shares started at Lm1.38.

Simonds Farsons Cisk plc (SFC) was again the week's darling. It first traded on Tuesday, leaping from a 93c1 open to a 98c close, as avid buyers readily snapped up all the supply which came on tap. By SFC standards, the day's turnover was heavy as 27,520 shares changed hands.

The good spirits continued to flow as SFC advanced to a year's high of Lm1 by Wednesday's close. It did not trade on Friday. Coincidentally, SFC last hit Lm1 on June 10, 2005 - precisely two years ago.

FIMBank plc was back in action last week, trading very actively on Wednesday, when 147,079 shares changed hands. The equity lost 4.9 US cents to settle at $1.90, 2.5% lower on the week.

On Monday Lombard Bank plc (LOM) announced that no material events and/or transactions have taken place from the financial period commencing January 1, 2007, to date which would require disclosure under the applicable Listing Rules.

The financial position of the company remained sound and the performance has been in line with the relative projections. Investors, however, turned a deaf ear to this, as the equity shed 1.7% to fall to Lm4.55 on Wednesday, on one small deal for just 100 shares.

LOM was fairly active on Friday as 5,528 shares were traded with closing price gaining 1c to close at Lm4.56 - 1.5% down for the week.

After a week's absence, Middlesea Insurance plc lost ground, falling 3c8 to Lm1.86 over two deals for 767 shares on Monday.

Grand Harbour Marina plc (GHM) was a hive of activity on Wednesday, the only day it traded when 18,595 shares were exchanged over nine deals, taking the price from a 74c9 open to a new all-time high of 78c8, to end the week 5% ahead.

On Tuesday, GHM published a Camper & Nicholsons Marina Investments Ltd (CNMI) Regulatory announcement. CNMI stated that while it is required to make a mandatory offer to all shareholders if it acquired more than 50% of GHM's issued share capital, it believes strongly in the benefits of retaining a Maltese locally listed marina company.

It therefore welcomes the continuing participation of local investors in GHM holding a significant minority interest. In the event that the GHM Free Float falls below the 25% minimum required to maintain GHM's Listing, GHM and CNMI will need to discuss the situation with the Malta Financial Services Authority to consider whether there are grounds for GHM to seek a dispensation, allowing it to maintain GHM's listing on the MSE.

If GHM's listing is maintained, CNMI would not expect to exercise any rights it may obtain to acquire compulsorily the remaining GHM shares.

On Wednesday GHM announced that at the AGM, the shareholders approved the profit and loss account and the balance sheet for the financial period ended December 31, 2006, and the appointment of KPMG as auditors.

Nicholas Maris, by virtue of his qualifying shareholding, has reappointed himself and David Mead as directors. Simon J. Arroll has also re-appointed himself as director. The other directors will be Walter Bonnici, Anthony Demajo, Vincent Portelli and Pascal Demajo.

By extraordinary resolution Mr Maris, Mr Arroll, Portosalvo Holdings Ltd and V&F Portelli & Sons Ltd were each released from their obligation not to sell or otherwise dispose of their remaining shares. So they are free to sell all of their remaining shares to CNMI.

It was also resolved that CNMI is allowed to undertake a due diligence exercise on and about the company, as necessary or desirable, to enable CNMI to confirm, withdraw, modify or render unconditional the offer to acquire shares in the company.

International Hotels Investments plc (IHI), as expected, traded significantly lower, slumping 13.79% on Friday, 16 euro cents to €1 as the equity traded for the first time post its one for six bonus issue.

On Wednesday IHI announced that, following the conclusion of the subscription agreement between IHI, Corinthia Palace Hotel Ltd and Istithmar Hotels FZE, IHI has acquired the entire holding of Corinthia Towers Tripoli Ltd, and the Czech company owing the Corinthia Towers Hotel in Prague, against the allotment of 192 million ordinary listed shares of €1 each, and €15 million in cash.

IHI has also issued and allotted 178 million ordinary unlisted shares of €1 each to Istithmar, of which €44.5 million have been paid up, and the remaining balance is to be paid by Istithmar by August 30.

IHI also capitalised €4.96 million from its revaluation reserve through the issue of 4,961,223 fully paid up bonus shares of a nominal value of €1 each.

Medserv plc did not trade. On Tuesday, the company announced that at the AGM the shareholders approved the profit and loss account and balance sheet for the financial year ended December 31, 2006, the net dividend of 2c06 per share as recommended by the directors, and the re-appointment of KPMG as auditors.

The following were re-appointed directors: Anthony J. Duncan, Anthony S. Diacono, Joseph F.X. Zahra and Johannes Jacobus can Leeuwen.

Datatrak plc (DTK) suffered a stinging drop of 6.9% to 24c2. This however on a risible deal for 233 shares worth all of Lm56.39 effected on Wednesday.

On Monday DTK announced that at the AGM the profit and loss account and balance sheet for the financial year ended December 31, 2006, were approved, together with the re-appointment of KPMG as auditors.

The following were reappointed directors: Walter Bonnici, Patricia Ransley, Joseph Azzopardi, Joseph Spiteri, Saviour Portelli, Francis Galea Salamone, Maurice Mizzi, Pascal Demajo and Anthony Demajo.

DTK also announced that DTK Nigeria Ltd, a Nigerian company in which DTK Mena holds an interest, together with Nigerian investors, has been offered a telecommunications licence by the Nigerian Communications Commission for a period of five years.

In the Government bond market, turnover by value reached Lm5.76 million with 19 issues traded. In the corporate bond market there were 28 deals for a total turnover value of Lm78,027. Turnover value in the Treasury Bill market totalled Lm911,011.

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.