Efficient markets or deficient Mr Big?

"In an efficient market, prices 'fully reflect' available information," said Chicago Professor Eugene Fama in a paper he delivered at the 1969 annual meeting of the American Finance Association. In other words, in an efficient market, you cannot beat the market unless you have inside information. Then, the efficient market theory held that share prices are always correctly priced on the basis that all that is 'public knowledge' about a share is reflected in its market price. It was this theory which launched the concept of index funds.

Of course, in the decades since, the internet - which by coincidence was, also in 1969, in its incubation stage in the hands of the US military - and the explosion in communications technology, has seen to today's instant global dissemination of the 'available information' that Gene Fama referred to. Furthermore, sequels in 1991 and 1997 by Fama himself, went quite a way to meeting the thoughts of those who discredited the theory.

So what relevance, if any, does the efficient market theory - even if many today consider it redundant - have to the local market? To what degree is the virtual absence of institutional investors from our markets related to 'available information' in an efficient market? Equity turnover in the year to date, at approximately €34 million, is about one million euros short of that for the same period last year.

The recent regulatory requirement for the publication of interim reports has gone a long way towards providing 'available information' to ensure a more efficient market (or level playing field) for the man in the street - whatever Mr Big institution does. And I know that fellow stockbrokers share these views, especially insofar as very important, strategically placed centres of influence.

The raised temperatures of the summer heat were not in the least reflected in the Index's temperature, which dropped by 0.77% to 4,163.057. The Exchange went through the lethargic motions of trading. Disappointingly, Bank of Valletta plc (BOV) gave up its recent gains and saw its tentative recovery unravel to fall back to €4.60, a 2008 low previously struck early in June. HSBC Bank Malta plc (HSB) kept its head above water, gaining 0.5% to €3.82 and GO plc's (GO) beleaguered shareholders were relieved to see the share price ring a 10 cents advance - up 4%. However, the best results came from small cap Grand Harbour Marina plc (GHM) which gained 4.9% to €2.15.

BOV traded just a fraction lower than the previous Friday's €4.87 close on Monday and Tuesday. However the direction turned decidedly south from Wednesday as BoV skidded to successively lower closes of €4.78, €4.65 on Thursday and re-touched its 2008 - and multi-year-low of €4.60 on Friday. This was also BoV's busiest session for the week with more than half the week's turnover effected on this day. It ended the week a stinging 5.5% down on a total turnover of 31,303 shares for a value of €146,599. At the end of trading, the best bid was for 2,000 shares at €4.571, while offers of 2,468 shares started at €4.60.

HSB fared better, ending the week in positive territory, even if with a slight 0.5% gain. It opened on a positive note, climbing 4c to €3.84, then peaked at €3.85 on Wednesday and maintained this level throughout Thursday, with the exception of the final deal effected at €3.82, which was also Friday's closing price. Turnover totalled 59,061 shares for a value of €226,371. The price was supported by a bid for 1,500 shares at €3.83, while supply of 2,001 shares was available at €3.86.

GO held on to its €2.50 price tag on Monday, advancing first to €2.54 on Tuesday with the final deal effected at €2.60. It maintained this level till Thursday, the last day it traded, to end the week, an encouraging 4% ahead on a total turnover of 25,772 shares for a value of €65,360. At the end of Friday's session, the best bid for 1,900 shares stood at €2.51 with supply of 523 shares at €2.599.

On Friday, Go announced that Forgendo Ltd, the joint venture between Go and Emirates International Telecommunications (Malta) Ltd, has acquired a further 676,277 shares in Forthnet S.A.'s issued share capital for a total consideration of €2,870,175.78.

Malta International Airport plc opened the week unchanged, gaining a cent to €3.12 on Tuesday. It only traded again on Friday at the same price, ending the week up by a negligible 0.3%. Volume totalled just 8,100 shares for a value of just over €25,000. Outstanding demand at the close of Friday's session was for 5,000 shares at €3.062 with supply of 800 shares at €3.12.

Earlier this week, CEO Julian Jaeger gave details of MIA's actual results for the first six months and the projected performance for the rest of 2008. MIA is expected to handle 3.2 million passenger movements this year, an 8% increase over last year. The first six months have yielded positive results showing substantial increases over the same period last year, with the outlook for the next six months indicating further growth, even if at more modest rates.

Lombard Bank plc only traded on two days with 4,075 shares changing hands in four deals, which saw the price slip 5c to €2.90.

Middlesea Insurance plc (MSI) lost ground on embarrassingly low turnover of 860 shares to fall 2% to a 2008 low of €3.34. MSI last traded at this level just under three and a half years ago.

Simonds Farsons Cisk (SFC) which has moved in a diametrically opposite direction to the index over the past few months, continued to push ahead, climbing to €2.78 on Tuesday and an all-time peak of €2.80 on Wednesday. Volume totalled 12,510 shares for a value of €35,018.

A number of companies, representing large, mid and small cap stocks only traded on one day.

Monday saw Maltapost plc's only presence with 3,257 shares changing hands, stable at €0.80; International Hotels Investments plc only traded on Tuesday with 9,523 shares swapped at the unchanged price of €1.05, while a mere 3,230 shares were traded in Fimbank plc on Wednesday as the price eased 1.6% to $1.86. On the same day, 2,000 shares in GlobalCapital plc were negotiated at €2.50, 3.8% lower than its previous close, while GHM gained 10c on a buying spree of 23,153 shares to close at €2.15. It was the week's best performer gaining 4.9%. Crimsonwing plc rounded off the 'one-day traders' with two deals for 2,500 shares on Friday which brought the price down by 3.7% to €0.52.

Santumas Shareholdings plc announced on Thursday that Ivan J. Burridge has resigned from the office of director with effect from July 3. Mr Burridge is considered the doyen of Maltese stockbroking. It is a pleasure and a privilege to salute him and thank him for his sterling contribution to the profession.

In the Government Bond market, turnover by value amounted to €3.5 million with 53 deals struck in 14 stocks. In the corporate bond market, there were 12 deals for a total turnover value of €74,547. Turnover value in the Treasury Bill market totalled €9.3 million.

This report was provided by J.G.P. Bonello managing director of Financial Planning Services Limited, of 4, Marina Court, 1 G. Calì Street, Ta' Xbiex, which 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. E-mail: info@bonellofinancial.com or phone 2134 4243.