Armageddon in America, mellow in Malta

It has been a week of high drama in the US financial markets. In a decision of momentous import to the US - and therefore the world's - markets, the US Treasury effectively nationalised the massive mortgage agencies, Fannie Mae and Freddie Mac. In a capitalist economy, the terminology applied was 'conservatorship'.

The decision was taken last Sunday, to pre-empt any dysfunctionality when the markets opened on Monday. The immediate effect was that a sea of green washed across the world's stock markets representing triple digit gains in virtually all the major stock market indices.

By Tuesday, Lehman Brothers, the 158-year old US investment bank, saw its shares plunge more than 40% when the state-owned Korea Development Bank pulled out of negotiations about a capital infusion.

Lehman's share price had already nose-dived from a high of $67.73 last February to a close of $16.20 the previous Friday. From Tuesday's close of $7.79, it has collapsed a further 50 % as I write this report to $3.74.

This represents a chilling 94% drop in the last seven months. By the time you read this, Lehman Brothers will most probably have been taken over by one of the two or three financial institutions being rumoured as potential bidders.

Simultaneously, Washington Mutual, America's largest savings-and-loan bank - whose highest share price in the last 52 weeks stood at $39.25, hit a low on Thursday night of $1.75. That is a stunning 95% loss. As if not to be outdone, insurer and Dow Jones component American International Group (AIG) has collapsed 80% from a 52-week high of $70.13 to $13.79.

Back home, the four-day trading week thankfully continued unperturbed at the previous week's positive pace, with the Index gaining a further 1.3% to close at 3,990.228. HSBC Bank Malta plc (HSB) advanced for the second consecutive week, up a more than respectable 3.7%. Also on the bright side, Bank of Valletta plc (BOV) and GO plc (GO) maintained their prices.

However, it was trading in mid and small-cap stocks which propped the equity turnover figures to just over the million mark. Fimbank plc (FIM) made up 34% of this; unusually, Plaza Centres plc (PZC) was second in the turnover tables at 16%, followed by Middlesea Insurance plc's (MSI) 14% stake. Neither of the big banks made it to the fourth place, which was taken by Maltapost plc (MTP), with a turnover value of €123,031, equivalent to 12% of the week's total.

BOV was stable, trading in an extremely tight range of €4.689 to €4.70, closing the week a smidgen lower at €4.69. After the previous week's quick-footed pace, trading in BoV slowed to a trickle with the week's volume just 25% of the previous one. In total, just 13,571 shares changed hands for a market value of €63,747.

At the end of the session, the best bid was for 204 shares at €4.55, while supply of 3,746 shares started at €4.69. Notably, BoV is up 13% in a month, from its year's closing low of €4.15 on August 12.

HSB opened the week 2c higher at €3.30, accelerating 9c to €3.39 in the final two minutes, even if on low turnover. It spent the rest of the week see-sawing between €3.39 and €3.40, closing Friday at the latter price - up 3.7%.

Even here, turnover was on the low side with 24,128 shares changing hands for a value of €81,748. At the end of the session, bids for 4,000 shares started at €3.30, while supply of 1,205 shares was available at €3.399. Since its year's low of €2.90 on August 8, HSBC shares are up 17%.

International Hotel Investments plc started out flat but dropped a cent to €1.04 on reasonable turnover of 19,850 shares.

It was stable on Wednesday, recovering first to €1.05 on Friday and rising to €1.06 in the final deal to close the week up by 1%. Turnover for the three days totalled 28,478 shares, valued at €29,703.

GO maintained its €2.30 price tag on Tuesday with turnover of 11,350 shares, gaining a cent on a 3,000-share deal on Wednesday.

It was active again on Friday closing at €2.309, just 0.4% ahead on the week. In all, 17,315 shares traded for a value of just under €40,000.

Malta International Airport plc barely made its presence felt. In all, just four deals were effected - one on Wednesday and three on Friday - totalling 1,750 shares.

It started out unchanged at €2.95 rising 5c in the final deal for all of 90 shares. Nonetheless this deal helped MIA gain 1.7% on the week. At the end of Friday's trading, the best bid was for 1,000 shares at €2.329, with supply of 4,310 shares at €3.00.

FIM was largely stable throughout the week, trading at $1.909, $1.91 and closing $1.908 - just 0.05% lower.

Volume was strong with 264,369 shares swapped, for a value of €358,449.

MSI only traded on Thursday. The three deals for comparatively strong turnover of 48,850 shares for a value of €148,993 brought the price down 1.6% for MSI to close at €3.05.

MTP opened higher on aggressive buying with the price settling at €0.80. Turnover was a shade under 115,000 shares, with one of the day's six deals being for 100,000 shares.

The price slipped back to €0.78 on Wednesday but rebounded to €0.80 on Friday, buoyed by a bout of buy orders. Turnover for the week amounted to 153,881 shares for a value of €123,031.

Grand Harbour Marina plc suffered a bruising 6.5% drop on Wednesday, falling to €2.15 on two deals for 2,600 shares.

PZC gained 3c to €1.73 on two deals for a total of 1,000 shares on Wednesday. Considerable demand of over 95,000 shares pushed the price higher on Friday as PZC closed at a 2008 high of €1.75, up 2.9% on the previous week.

RS2 Software plc was flat, ending the week at €0.829, while Crimsonwing plc, which only traded late on Friday, closed 1.6% up at €0.518 on five deals for 35,000 shares.

In the Government Bond market, turnover by value amounted to €880,163 with 46 deals struck in 10 stocks.

In the corporate bond market, there were 30 deals for a total turnover value of €310,779. Turnover value in the Treasury Bill market totalled €3.8 million.

This report was provided by J.G.P. Bonello, managing director of Financial Planning Services Limited, of Marina Court, G. Cali 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 2134 4243.