When will King Kong capitulate?

"Like a Hollywood monster that is impervious to bullets, the credit crisis refuses to lie down and die. The authorities have bombarded it with interest-rate reductions, tax cuts, special liquidity schemes and bank bail-outs, but still the creature lumbers forward, threatening new victims with every step. Global stock markets are suffering double-digit losses this year, and credit markets are once again gummed up."

You would be excused for thinking this quote is from yesterday's headlines. Actually, it is from Buttonwood's column in The Economist, August 28. The comparison to an indestructible King Kong was so fearfully accurate. But when will the creature die?

Since then, on September 7, Freddie Mac and Fannie Mae were effectively nationalised. A week later, on September 14, the hypothetical Hollywood monster had swallowed up Lehman Brothers, which filed for bankruptcy, and Merrill Lynch, which agreed to be taken over by Bank of America. AIG and Washington Mutual in the US, and a spate of British and European banks, together with the whole Icelandic economy, were the next victims. The monster shrugged aside the unified artillery of the world's massed central banks, which created cumulative bail-outs totalling over $1,000 billion, slashed interest rates, while their governments doubled (or more) the limit of bank deposit guarantees. Some even guaranteed all bank deposits.

In the six weeks since the opening paragraph, both the Dow Jones and the FTSE 100 have dropped a further 28% as I write (even if a 700-point dive on the Dow was erased after an hour's trading). A massive, powerfully co-ordinated interest rate slashing initiative by world central bankers - acting in rare unison last Wednesday at lunchtime - initially totally reversed a 5% drop in markets. Feverish volatility soon turned screens all red again before the end of trading - this probably led by hedge funds de-leveraging their positions. Who knows how much more they have to de-leverage?

Two major advantages for Maltese investors are that securitisation and short-selling are alien to them, contrary to their massive abuse overseas, which caused unprecedented repercussions on international markets.

Understandably, the Malta Stock Exchange did not have a good week. The index fell for five consecutive days, closing Friday 4.67% down at 3,471.978 - a 39-month low. Investors concentrating only on a local equity portfolio will still be dismayed to see that practically all equities closed in negative territory, with Fimbank plc (FIM) leading with a 11.4% plunge, followed by Global Capital plc's (GCL) 9.5% drop, GO plc's (GO) 9.1% dive and Bank of Valletta plc's (BOV) 8.9% lunge.

BOV was fairly stable in the early part of the week, spending most of Monday and Tuesday at €3.90. The mood changed on Wednesday, when, in line with the unremitting declines in world markets, BoV slumped to a €3.74 close. It floundered further on Thursday, sinking to a multi-year low of €3.50. The end of the week brought some consolation as BoV gained 10c, but still closed the week a glum 8.9% down. Total turnover amounted to 42,892 shares for a market value of €161,662. At the end of trading, the best bid was for 1,000 shares at €3.55, with offers for 1,320 shares starting at €3.60.

HSBC Bank Malta plc (HSB) traded at €3 on Monday, with the last deal effected at €2.98 on slim turnover of just 3,401 shares. It was stable on Tuesday, but like BoV suffered a setback on Wednesday, losing 2.7% to €2.90 on the day's moderate volume of 23,665 shares. HSB was thankfully steady on Thursday, and although Friday was a rollercoaster ride with the price dipping to €2.75, it recovered to €2.90 to close the day unchanged. For the week however, it was down 3.3% on turnover 63,612 shares for a value of €183,580. At the close of trading, bids for 2,073 shares were €2.75, while supply of 12,400 shares was at €2.88.

International Hotel Investments plc started the week stable at €1 and fell back very gradually to close Friday at €0.98. Turnover picked up from the recent low levels to 96,488 shares for a value of €96,046. At the close of trading, there were no outstanding bids, while supply of 8,947 shares was at €0.99.

GO was steady at €2.20 from Monday to Wednesday but tumbled 4% to €2.111 on Thursday and continued its downward spiral on Friday to close at €2. Not only is this a gloomy 9.1% drop on the week, but also a price last seen on February 9, 1999, and 4.1% short of its 1998 Lm0.90 IPO price. On Monday, Go announced that Forgendo Ltd (the joint venture company between Go and Emirates International Telecommunications (Malta) Ltd) has acquired a further 110,987 shares in Forthnet SA's issued share capital, for a total consideration of €172,749.40.

Malta International Airport plc only dealt on Monday and Wednesday. On Monday it fell 2.3% to €2.93 and continued lower on Wednesday, down to €2.90, to close the week 3.3% down on turnover of 15,000 shares for a value of €43,940.

FIM fell back throughout the week, first losing 3.4% to $1.778 on turnover of 12,100 shares on Tuesday, a further 4.9% to $1.69 on Wednesday, and ending the week at $1.63. That is a startling 11.4% down on the week on a total turnover of 29,100 shares for a value of €36,196.

On Friday, FIM announced that the group's performance for the second half of 2008 is strong and continues to show improvement over the same period last year. Liquidity ratios remain high and well above regulatory requirements; no liquidity pressures have materialised as the group's funding is now more diversified and more deposit-based than in the past. The financial position of the group remains sound. The board noted that while the recent drops in FIM's share price, on small volumes of activity, may be a reaction to the general sentiment arising from international financial market crises, they are not supported by any relationship to FIM's financial health.

Lombard Bank plc lost 3c to €2.97 on Monday, but advanced to €3.05 on Tuesday on moderately strong turnover of 25,000 shares. However, it fell back to €2.97 on Friday to close the week 1% lower on 37,895 shares for a value of €114,467.

Middlesea Insurance plc (MSI), Plaza Centres plc (PZC) and GCL only dealt once, each registering an identical 1,000-share deal. MSI was close to unchanged, just 0.03% lower at €2.949, PZC was stable at €1.75, while GCL suffered a bludgeoning 9.5% drop, down to €1.991.

Maltapost plc (MTP) opened the week 2.8% lower at €0.82, maintaining this price throughout the week. Turnover amounted to 37,828 shares for a value of €31,021. On Monday MTP announced that the board of directors agreed that audited financial statements for the year ended September 30 will be presented for approval to the board on January 15; the AGM will be held on February 17; and an AGM will be held on November 20 to present an overview of performance and to appoint directors to hold office between November 20 and February 17, 2009.

Both Grand Harbour Marina plc and Crimsonwing plc (CW) were stable, with the former trading steadily at €2.20, while CW held on to its €0.50 price tag for the week's 33,300 shares, all swapped on Tuesday.

San Tumas Shareholding plc traded at €3 on a 123-share deal on Tuesday. This close-ended investment scheme was the only security to close in positive territory, up 13.2%. This price is lower than its last published NAV of €4.129.

On Thursday Datatrak plc announced that, through its subsidiary Datatrak Solutions Ltd and Datatrak Italia srl, the company has concluded four separate multi-year contracts in the UK, Italy and Libya.

In the Government Bond market, turnover by value amounted to a hefty €21.3 million with 48 deals struck in 16 stocks. In the corporate bond market, there were 52 deals for a total turnover value of €420,577. Turnover value in the Treasury Bill market totalled €2.7 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. info@bonellofinancial.com; 2134 4243.