Financial news

Local equities continued to move lower after the weekend break, dragged by weakness in HSBC Bank Malta, the largest component of the MSE Index which pulled back by 0.4 per cent to a new multi year low of 4,339 points.

HSBC Bank Malta was the day's most liquid and actively traded equity with a grand total of 19,446 shares, carrying a market consideration of €76,007, being swapped across 18 transactions. Sellers were the dominant force in the market squeezing the price lower by 5c or 1.3 per cent to close the day at €3.89.

After Friday's close the bank's directors, in their Interim Statement, commented that interest income so far this year was 'below expectations' due to a decrease in margins as well as increased competition. Furthermore, the adoption of the euro will have a considerable negative impact on the income generated through foreign exchange dealings. On a positive note, operating expenses remained under tight control and there was no deterioration in the quality of credit lending whilst liquidity and solvency indicators remain sound and above regulatory levels.

Bank of Valletta closed the day unchanged at €4.95 as 4,687 shares were swapped across 10 transactions. At the end of the session, a further 2,877 shares remained outstanding on the offer side at the closing price, while 2,025 shares were best bid at €4.90.

Go declined by the slimmest of margins as two investors swapped a mere 420 shares at the €2.899 level, while Simonds Farsons Cisk gained 1c or 0.4 per cent as 12,445 shares were swapped across nine transactions at the €2.71 level. The foods and beverages group is still trading at a considerable discount to its net asset value as well as with the attached rights to receive a gross final dividend of 5c316 per share.

US weekly review

The US economy got off with a weak start to the second quarter with the value of retail sales falling by 0.2 per cent in April, undermined by a slump in motor vehicle sales. Nevertheless this turned out to be better than expected, perhaps due to some consumers bringing spending forward in anticipation of tax rebates. However, the general trend in retail sales remains distinctly downward considering that household buying power is collapsing.

Consumer confidence continues its downside trend with the Conference Board and University of Michigan indices both at cyclical low. The labour market also stayed weaker, while key housing indicators suggest that the property slump still has some way to go despite a surprising rebound in the housing starts figure for April. Energy prices have soared to new highs this week. The surge in oil prices, which is lifting gasoline prices, is helping to drive headline inflation upward, thereby dampening real income growth. Meanwhile, prices for consumer goods excluding food and energy are basically stagnant.

Despite this, the rise in headline and core inflation during last month was less than expected. The inflation report provided reassurance that pipeline inflation pressures are being stopped cold by soft consumer demand.

Elsewhere, the decline in April Industrial production outweighed projections, with regional surveys highlighting that the manufacturing sector is still struggling.

This article has been prepared by Bank of Valletta p.l.c. (the Bank), which is licensed to conduct investment services business by the MFSA, for your general information only. This information is not a solicitation or offer by the Bank to acquire or sell securities. Nor does it constitute any form of advice by the Bank. Appropriate advice should be obtained before making any such decision. Past performance is not necessarily a guide to future performance and the value of your investments may fall or rise.