Global markets react positively to interest rate cuts

The international markets reacted positively this week as the US Federal Reserve slashed interest rates from one per cent to virtually zero, as it announced that interest rates would be fixed at a range between zero and 0.25%. A similar move was announced by the Bank of Japan as the bank reduced its overnight rate to 0.1% from 0.3%, amid a rapidly deteriorating economy.

Markets also initially reacted positively on Friday as President George W. Bush announced that the US government was to grant an emergency loan to the US auto industry to prevent repercussions in the wider economy. The $13.4 billion loan to Chrysler and General Motors will be drawn from the Troubled Asset Relief Programme.

The announcement came on the same day that the rating agency Standard and Poor's downgraded 11 top global banks, citing increased industry risk and a deepening economic slowdown.

On Friday, oil prices tumbled near to a five-year low, having traded below $35 a barrel, as the global economic slowdown overshadowed OPEC's record supply cuts. This fall had a negative impact on the markets on Friday as investors focused on the lingering global economic concerns.

On the other hand, the Malta Stock Exchange index closed 1.04% down on the previous week, closing at 3,278.842 points. Since the beginning of the year the index has lost 33.60%.

During the week, seven equities were negotiated, with six equities closing in negative territory and one in positive territory. A total of 270 deals were registered on the stock exchange for a turnover of over €5.8 million. In the equity market, 103 transactions were carried out for a total value of €283,592.

In the corporate bond market 35 transactions for a total value of €302,091 were executed, while in the government bond market 121 transactions were executed for a value of over €1.2 million. Eleven transactions were carried out in the Treasury Bills market for a value of over €4 million.

Bank of Valletta plc (BOV) was the most actively traded equity, with its share price losing 2.51% to close at €3.50, as 42,786 shares were negotiated across 45 deals for a value of €153,112. BOV started the week negatively as the share price fell by 0.28% but was the best performer on Tuesday as the price appreciated by 0.53% to €3.599. On Wednesday, the price remained stable as 8,302 shares changed hands.

On Thursday, the price dropped by 0.11% to €3.595 as 13,989 shares were negotiated. This followed the bank's annual general meeting on Wednesday during which shareholders approved a gross dividend of €0.0675 per share, amounting to a total of €9 million. When taken together with the gross interim dividend paid on May 28, shareholders will receive a total gross dividend for the year of €0.2025 per share. Shareholders present also approved an increase in the nominal and paid-up value of the ordinary shares from €0.75 to €1 per share, which increase is to be funded by a capitalisation of reserves amounting to €33.33 million, and a bonus issue to shareholders of one share for every five shares held effective on January 15, 2009. On Friday, the BOV share price fell by 2.64% as 6,300 shares were transacted on seven deals.

HSBC Bank Malta plc (HSBC) saw its share price fall by 3.51% as it closed at €2.75 with 31,540 shares being negotiated across 30 deals. On Monday, 0.35% of HSBC's share price was lost when it closed at €2.84 as 4,650 shares changed hands. On Tuesday and Wednesday, the share price remained stable at €2.84 as 4,200 shares and 3,305 shares respectively changed hands. On Thursday, the share price increased by 0.18% to €2.845 as 6,620 shares were negotiated. However, on Friday the share price fell by 3.34% on 8,565 shares spread across 10 deals.

On Monday, Fimbank plc saw its share price fall by 0.72% to $1.38 as 1,720 shares were traded across two transactions.

Maltapost plc was the only positive performer this week with its shares appreciating by 1.25% and closing at €0.81. On Wednesday, the share price remained stable at €0.80 as three deals for a total volume of 15,091 shares were executed. On Thursday the share price increased by 1.25% to €0.81 as 12,801 shares changed hands across five deals. Year to date Maltapost plc remains the best performer as its share price is up 62%.

The share price of Go plc dropped by 2.37% to €1.85 as 5,407 shares were negotiated across ten deals. On Monday, Go's share price remained stable at €1.895 on a single deal of 1,000 shares. On Tuesday Go pulled the index lower as its share price dropped by 2.37% to €1.85 as 2,020 shares changed hands across four deals. On Wednesday, a single deal of just 367 shares left the share price unchanged.

Similarly, a single deal on Wednesday of 1,491 shares led to a drop of 0.56% in the share price of International Hotel Investments plc, with the share price closing the session at €0.895.

Simonds Farsons Cisk plc was the worst performer this week as the share price tumbled 27.76% to €1.90 when 2,950 shares were negotiated across seven deals. The equity traded on Wednesday and Thursday, falling 23.95% and five per cent on the respective days.

On Thursday, the application forms for the Midi plc bond issue were made available to authorised intermediaries, with the offer to the public opening on January 13. The issue is for €30 million in bonds due in 2016-2018, in either or each of two issues denominated in euro and pound sterling respectively. Both bonds will be issued at a nominal value of €100 and £100 each respectively. They will be issued at par and bear interest at the rate of seven per cent per annum. Copies of the prospectus are now available for potential investors to read before considering whether to invest in the bond.

This report, which was compiled by Jesmond Mizzi, managing director of Jesmond Mizzi Financial Services Limited (JMFS), does not intend to give investment advice and the contents therein should not be construed as such. JMFS is licensed to conduct investment services by the MFSA. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. For further information contact JMFS at 67/3, South Street, Valletta, or on Tel: 2122 4410 or e-mail jmizzi@jmfs.net.