The MSE Share Index lost a further 12.9 per cent during the summer months as all financial stocks recorded double-digit declines with the exception of FIMBank and Lombard Bank Malta, which recorded marginal positive share price movements. The drop during the third quarter of the year is the steepest quarterly decline since the second quarter of 2006, which marked the start of the current bear market. The index touched a three-year low of 3,732.847 points on September 18.
The summer months were dominated by the interim reporting season. The MSE Share Index posted a sharp decline following the release of HSBC Bank Malta's interim results on July 25 and the warning of a possible change in the Bank's dividend policy. The loss reported by Middlesea Insurance during the first week of August continued to weaken sentiment, but towards the end of August the equity market began to recover following the publication of encouraging half-year results from International Hotel Investments, FIMBank and Lombard Bank. The index posted strong gains during the first two weeks of September, rising by 4.6 per cent to just below the 4,000 mark. However, the collapse of US investment bank Lehman Brothers on September 14 dented investor sentiment again as the index slipped by 5 per cent, following the fresh announcement by Bank of Valletta warning on the negative impact the renewed international financial market turmoil was likely to have on their year-end September 2008 results.
Trading activity across all listed equities dropped to €9.7 million compared to activity of €20.8 million during the first quarter and €12.3 million in the second quarter. While there was a continued drop in volumes in the larger caps, some of the smaller caps were particularly active. Similar to the previous quarter, high volumes characterised FIMBank, Middlesea Insurance and Plaza Centres trading activity. A further 1.75 million FIMBank shares were traded during the summer months following the equally strong activity of 2.2 million shares in the previous quarter, mainly on the back of the excellent financial results during the first half of 2008 and the declaration of a special dividend. Middlesea Insurance also saw a further 130,000 shares change hands on the back of the previous quarter's volumes, totalling 160,000 shares. This equates to just over 1 per cent of the company's issued share capital during the last six months, possibly indicating the presence of a large investor seeking to build up a sizeable stake. This did not stop the decline in the share price. In fact, MSI shares posted a further 13.5 per cent decline mainly due to the loss reported during the first half of the year on negative movements in the company's investment portfolio. On the other hand, Plaza's share price edged 1.45 per cent higher during the quarter to a six-year high of €1.75 on unusually strong volumes of 175,000 shares during the summer months, which equals the total activity in 2007. This high activity in Plaza shares follows strong volumes during the second quarter of 2008, when 265,000 shares were traded.
While the two large banking equities fared the worst, posting negative returns of around 20 per cent each, Lombard Bank's share price, on the other hand, registered a marginal 1 per cent gain following the strong set of financial results issued on August 26. Lombard's financial performance during the first half of the year confirms the importance of the strategic acquisition of a majority shareholding in MaltaPost plc, which helped boost the group's profitability to a record level of €7.76 million. However the results also show that Lombard Bank is unlikely to be directly affected by the current international market turmoil because the bank has no holdings of international bonds. This helped sentiment towards the equity and following the publication of the financial results, fresh demand entered the market with over 105,000 shares changing hands, helping the equity stage a 5.1 per cent recovery from its pre-results price of €2.90. Lombard's subsidiary MaltaPost held on to the strong gains since the start of the year and edged only 1.2 per cent lower to a close of €0.82 after touching a low of €0.75 during August.
Large volumes were transacted at around the €0.80 level in recent weeks and were followed by the announcement on September 15 that the shareholding of GasanMamo Insurance in the postal operator dropped to below the 5 per cent level on September 10 from a level of 7.4 per cent in May 2008.
On the other hand, activity in the shares of Malta International Airport plc shrank during the summer months, causing the share price to post a 3.9 per cent decline to just below the €3 level. Despite the release of the company's interim results on July 18 showing a strong 26 per cent growth in profitability, there was a general lack of follow-through in the market. Moreover, MIA's traffic statistics for July and August (the most important months for the company as they account for 25 per cent of passenger movements) revealed that last year's record levels were maintained this year and this should help the company achieve the 8 per cent growth in passenger movements projected for 2008.
International Hotel Investments plc also had a disappointing performance on the market with a 2.3 per cent decline to €1.04 after dropping back to its €1 nominal value during the third week of September. During the first half of this year, IHI registered a pre-tax profit of €6 million mainly from the strong performance of the Tripoli Hotel. The company also announced property acquisitions in London and Benghazi as well as the important partnership with Intourist for the development of a chain of hotels in the Russian Federation.
Meanwhile, the development of the property in St Petersburg is nearing completion and should be operational during the coming months. This is expected to positively impact the group's profitability in 2009. Furthermore, IHI's hotel management subsidiary signed a number of new management agreements in various parts of the world. Despite these interesting developments demand for IHI shares remained muted and the share price drifted from the highs recorded in May shortly after the allotment of the bonus share issue.
While activity in the equity market has decreased, the newly-issued corporate bonds during the third quarter were all over-subscribed, indicating the strong levels of liquidity in the financial system. New bonds were issued by United Finance plc, Mediterranean Investments Holding plc and HSBC Bank Malta plc. Despite being announced on the day following the failure of Lehman Brothers, this HSBC bond was very well received by the market. In recent months there was also heightened activity in the Treasury Bill market as investors seek refuge during these turbulent times and park investible funds ahead of potentially more rewarding entry levels into the market in the months ahead.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, "RFC", are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Ltd.
The summer months were dominated by the interim reporting season. The MSE Share Index posted a sharp decline following the release of HSBC Bank Malta's interim results on July 25 and the warning of a possible change in the Bank's dividend policy. The loss reported by Middlesea Insurance during the first week of August continued to weaken sentiment, but towards the end of August the equity market began to recover following the publication of encouraging half-year results from International Hotel Investments, FIMBank and Lombard Bank. The index posted strong gains during the first two weeks of September, rising by 4.6 per cent to just below the 4,000 mark. However, the collapse of US investment bank Lehman Brothers on September 14 dented investor sentiment again as the index slipped by 5 per cent, following the fresh announcement by Bank of Valletta warning on the negative impact the renewed international financial market turmoil was likely to have on their year-end September 2008 results.
Trading activity across all listed equities dropped to €9.7 million compared to activity of €20.8 million during the first quarter and €12.3 million in the second quarter. While there was a continued drop in volumes in the larger caps, some of the smaller caps were particularly active. Similar to the previous quarter, high volumes characterised FIMBank, Middlesea Insurance and Plaza Centres trading activity. A further 1.75 million FIMBank shares were traded during the summer months following the equally strong activity of 2.2 million shares in the previous quarter, mainly on the back of the excellent financial results during the first half of 2008 and the declaration of a special dividend. Middlesea Insurance also saw a further 130,000 shares change hands on the back of the previous quarter's volumes, totalling 160,000 shares. This equates to just over 1 per cent of the company's issued share capital during the last six months, possibly indicating the presence of a large investor seeking to build up a sizeable stake. This did not stop the decline in the share price. In fact, MSI shares posted a further 13.5 per cent decline mainly due to the loss reported during the first half of the year on negative movements in the company's investment portfolio. On the other hand, Plaza's share price edged 1.45 per cent higher during the quarter to a six-year high of €1.75 on unusually strong volumes of 175,000 shares during the summer months, which equals the total activity in 2007. This high activity in Plaza shares follows strong volumes during the second quarter of 2008, when 265,000 shares were traded.
While the two large banking equities fared the worst, posting negative returns of around 20 per cent each, Lombard Bank's share price, on the other hand, registered a marginal 1 per cent gain following the strong set of financial results issued on August 26. Lombard's financial performance during the first half of the year confirms the importance of the strategic acquisition of a majority shareholding in MaltaPost plc, which helped boost the group's profitability to a record level of €7.76 million. However the results also show that Lombard Bank is unlikely to be directly affected by the current international market turmoil because the bank has no holdings of international bonds. This helped sentiment towards the equity and following the publication of the financial results, fresh demand entered the market with over 105,000 shares changing hands, helping the equity stage a 5.1 per cent recovery from its pre-results price of €2.90. Lombard's subsidiary MaltaPost held on to the strong gains since the start of the year and edged only 1.2 per cent lower to a close of €0.82 after touching a low of €0.75 during August.
Large volumes were transacted at around the €0.80 level in recent weeks and were followed by the announcement on September 15 that the shareholding of GasanMamo Insurance in the postal operator dropped to below the 5 per cent level on September 10 from a level of 7.4 per cent in May 2008.
On the other hand, activity in the shares of Malta International Airport plc shrank during the summer months, causing the share price to post a 3.9 per cent decline to just below the €3 level. Despite the release of the company's interim results on July 18 showing a strong 26 per cent growth in profitability, there was a general lack of follow-through in the market. Moreover, MIA's traffic statistics for July and August (the most important months for the company as they account for 25 per cent of passenger movements) revealed that last year's record levels were maintained this year and this should help the company achieve the 8 per cent growth in passenger movements projected for 2008.
International Hotel Investments plc also had a disappointing performance on the market with a 2.3 per cent decline to €1.04 after dropping back to its €1 nominal value during the third week of September. During the first half of this year, IHI registered a pre-tax profit of €6 million mainly from the strong performance of the Tripoli Hotel. The company also announced property acquisitions in London and Benghazi as well as the important partnership with Intourist for the development of a chain of hotels in the Russian Federation.
Meanwhile, the development of the property in St Petersburg is nearing completion and should be operational during the coming months. This is expected to positively impact the group's profitability in 2009. Furthermore, IHI's hotel management subsidiary signed a number of new management agreements in various parts of the world. Despite these interesting developments demand for IHI shares remained muted and the share price drifted from the highs recorded in May shortly after the allotment of the bonus share issue.
While activity in the equity market has decreased, the newly-issued corporate bonds during the third quarter were all over-subscribed, indicating the strong levels of liquidity in the financial system. New bonds were issued by United Finance plc, Mediterranean Investments Holding plc and HSBC Bank Malta plc. Despite being announced on the day following the failure of Lehman Brothers, this HSBC bond was very well received by the market. In recent months there was also heightened activity in the Treasury Bill market as investors seek refuge during these turbulent times and park investible funds ahead of potentially more rewarding entry levels into the market in the months ahead.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, "RFC", are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Ltd.