Financial news

During the mid-week session at the Malta Stock Exchange, the equity Index was dragged lower by a sharp drop in a single equity which outweighed gains in three others, thereby shedding 0.2 per cent to terminate yesterday's session at 3,342 points.

A single transaction in Malta International Airport saw two investors swap a mere 1,000 shares at €2.329, which represents a 17c1 or 6.8 per cent discount to its previous closing price. The equity is now languishing in its lowest levels since September 2004, having dropped in excess of 20 per cent over the past four weeks alone. Investors are eagerly awaiting guidance from the interim directors' statement which should soon be published.

HSBC Bank Malta was the day's most liquid and actively traded equity with a grand total of 14,430 shares, carrying a market consideration of €42,163, changing hands across 14 transactions. The equity gained slightly and terminated the session at the €2.925 level.

Bank of Valletta moved higher by the slimmest of margins to reclaim the €3.60 level. The day's total activity consisted in 10,025 shares which were struck across 13 deals. At the end of the session, 1,201 shares were best bid at €3.58 while only 58 shares remained outstanding on the offer side at the €3.60 level.

Following Tuesday's selling activity, investors deemed the price of Maltapost had fallen too far and entered the market collecting a total of 8,019 shares in the process.

This activity boosted the share price by 3c5 or 4.9 per cent to close at €0.745.

Elsewhere in the market, Go attracted the exchange of 2,878 shares which were exchanged without altering the previous closing price of €1.90.

In the fixed interest sector of the market, activity was spread across eight corporate bonds and five government stocks with longer dated sovereign issues registering the biggest move in price. In fact, the 5.50% MGS 2023, the longest dated security, jumped 213 ticks as 100,000 nominal was purchased at the €106.90 level, while the 5.00% MGS 2021 and the 5.20% MGS 2020 moved higher by 12 and 144 ticks respectively.

Weekly UK economic review

Extraordinary times require extraordinary measures. The Monetary Policy Committee (MPC) slashed the bank rate by 150 basis points to three per cent, the largest one day reduction in the Bank rate in the history of the MPC.

Despite the already significant 200 basis points easing in the past month, markets are expecting further rate cuts. Rates are already at their lowest level since 1950s. The accompanying statement highlighted the importance of such a shocking rate cut, in what the Bank of England described as the most serious disruption in the banking system for a century and also pointed to a "continued severe contraction" in output over the near term.

On top of all this, the International Monetary Fund (IMF) sharply revised down its forecast for next year. The UK is expected to shrink by 1.3 per cent next year, much lower than the -0.1 per cent projected a month ago. This projection puts the UK as the worst economic performer to be, among the industrialised countries.

Such a doom and gloom economic environment was reconfirmed in the BOE's Inflation Report issued yesterday. The British economy will shrink sharply next year and inflation will tumble, fuelling expectations of further rate cuts. In its gloomiest set of forecasts in more than a decade, the central bank said the economy had probably already entered recession and was likely to contract more throughout next year. Annual inflation, which is at 5.2 per cent, is expected to fall to just below one per cent in two years, half the central bank's target.

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.