A time to sow and a time to reap

In 1952, Dr Harry Markovitz began to write a series of brilliant articles, later published in a book, which eventually led to his receiving the Nobel Prize in Economics in 1990.

They contain the foundation for Modern Portfolio Theory (MPT), which has since become the dominant model for investment professionals. His followers - who themselves earned Nobel Prizes - created many formulae to help determine the risk/reward of investments - Alpha, Beta, Gamma, etc.

Unfortunately, the one huge drawback of MPT is that it needs time - often, a lot of time - to work and yield results.

The Maltese investor has no time for such theories, always looking for a "get rich quick" killing on the Stock Exchange; constantly pulling out investment seeds sown (roots and all) to see if the investment is growing! The Maltese saying "Iz-zmien isajru il-bajtar" applied to investments, is the closest one can get to the "get rich slow" approach.

When, in addition to giving investments time to grow, one develops the knack of getting one's timing right, results reaped can be extremely rewarding.

This does mean having the courage not only to ignore the herd instinct, but also to take a diametrically opposed direction. For example, equity turnover in the first quarter of 2006 was just under Lm44 million - half the full year's. It is not ironic that this coincided with the all-time peak of the MSE Index. Contrarians, who got their timing right, and sold when everybody was buying, reaped their rewards, while those who followed the herd got trampled in the stampede.

Equity turnover for the year to last Friday went marginally over the Lm20 million mark. The MSE index is still 37.3% below its all-time high of March 28, 2006. So what are you waiting for - the trumpets that brought down the walls of Jericho?

The first week of October did not get off to a roaring start; equity turnover by value slowed to the fourth lowest for 2007 at Lm275,021. Incredibly, seven equities only traded on one day of the week while six, including index heavyweights, Bank of Valletta plc (BOV) and HSBC Bank Malta plc (HSB), ended the week totally flat.

The major price movements came from recently listed 6PM, up 4.5%, while on the negative side International Hotel Investments plc (IHI) tumbled 4.1%, followed by Malta International Airport plc (MIA)'s 3.6%. The MSE index ended the week a shade lower, 0.8% down at 4,838.615.

BOV saw a hushed open to the week, unchanged at Lm3.60, falling minimally to Lm3.595 in the final deal. The day's volume totalled just 1,111 shares. Tuesday saw the price pattern reversed so that BOV opened at Lm3.595 and closed at Lm3.60; volume was still low but more respectable at just under 7,000 shares. Wednesday saw just one deal for 1,000 shares at the same price, but in the usual game of ping pong, was back at Lm3.59 by Thursday's close. It returned to Lm3.60 on Friday to end the week completely flat on a total turnover of 19,486 shares for a value of Lm70,118. At the end of trading, best bids totalled 2,290 shares at Lm3.59, with a supply of 15,497 shares at Lm3.60.

On Monday, BOV announced that following the merger between Capitalia SpA and UniCredito Italiano SpA, the 14.55% holding of BOV shares currently held by Capitalia will be registered in the name of UniCredito Italiano SpA.

HSBC started the week on a quiet note at Lm1.909 and Lm1.91 on a turnover of 1,400 shares. The latter price was the highest HSB traded at. It spent the rest of the week in a very tight range of Lm1.90-Lm1.909, ending the week unchanged at Lm1.90. HSB was the most actively traded equity with turnover for the five days totalling 56,517 shares for a value of Lm107,493 - 39% of the week's total. At the end of trading, the best bid was for 1,000 shares at Lm1.895, while the best offer for 2,465 shares stood at Lm1.90.

Maltacom plc (MLC) only saw two minute deals on Monday; one for 400 shares at Lm1.40 and the other for 133 shares at Lm1.38. It was stable on Tuesday, but fell to a new 2007 low of Lm1.37 on Wednesday with 2,900 shares changing hands at this level. After a break on Thursday, MLC regained some lost ground advancing somewhat to close the day at Lm1.389 or 0.8% down on the week. At the end of Friday's session, demand was scarce with the best bid for 130 shares at Lm1.36 and the best offer of 10,470 shares at Lm1.40.

On Thursday MLC announced that at the extraordinary general meeting scheduled for November 16, two resolutions will be presented: to amend the Memorandum of Association so that the name of the company will be GO plc; and to amend the Articles of Association in relation to the worker-director, who should be appointed by the directors, on the advice of the employees, after an election.

Fimbank plc gained a mil to $1.945 on Monday's only deal for 2,000 shares nudging up to $1.95 on Wednesday. It retreated to $1.94 on Thursday but gained a cent on Friday, the most active day, when 25,497 shares changed hands, to end the week a miniscule 0.3% higher.

On Wednesday the company announced that Massaleh Investments KSCC, already a qualifying shareholder of the company, acquired 18,838,319 shares held by Global Financial Holdings N.V. (a fully owned subsidiary of Massaleh Investments KSCC, and also a qualifying shareholder). Following this special trade, the shareholders holding more than 5% of the issued share capital are: Massaleh Investments KSCC (45.27%), International Finance Corporation (7.25%), and Astrolabe General Trading Contracting Co (5.94%).

Simonds Farsons Cisk plc was stable at Lm1.06 on one deal for 2,500 shares on Tuesday. It traded again at Lm1.06 on Wednesday rising to Lm1.07 in the final 150-share deal. The week's remaining deals, effected on Thursday and Friday, were all struck at Lm1.07 as SFC continues relentlessly up.

A number of equities only traded on one day:

Tuesday saw Middlesea Insurance plc (MSI) still at its 2007 low of Lm1.65 on three minute deals which totalled 392 shares. On Friday the company announced that it has disposed of its entire shareholding in Malta International Training Centre with effect from last Monday.

Plaza Centres plc also only dealt on Tuesday, stable at 74c on one deal for 1,591 shares.

Recently listed 6PM traded at successively higher prices over Wednesday's three deals, at 68p, 69p and 70p; it advanced 4.5% to land the week's top performer's spot.

IHI only traded on Thursday, immediately shedding 2c5 to €1.07; it continued lower to €1.05, ending the day and the week at this level. IHI suffered the heaviest loss - down 4.1%. Turnover for the one day was relatively brisk, with 47,500 shares changing hands.

A trivial 700 shares changed hands in MIA in two deals on Friday; the first at Lm1.36 and the other at Lm1.35, leading the equity to register a 3.6% loss on the week.

Friday also saw four small deals totaling 242 shares in Lombard Bank plc, flat at Lm4.75. Medserv plc was also static at Lm1.60 on two trades for 3,000 shares on the same day.

In the Government bond market, turnover by value reached Lm685,052 with 14 deals struck in eight stocks. In the corporate bond market there were 32 deals for a total turnover value of Lm38,733. Turnover value in the Treasury Bill market totalled Lm406,329.

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