During the final three months of 2008, the MSE Share Index shed 13.85 per cent - the third worst quarterly performance in the history of the local Borża. The worst ever performances were recorded in Q2 2006 (-16.6 per cent) and Q1 2001 (-16.5 per cent). The Index touched a fresh three year low of 3,191.141 points on December 22 before edging higher at the end of the year to 3,208.215 points.
The final quarter was characterized by a steep decline in trading activity to a value of just under €6 million as buyers retreated from the market following the collapse of Lehman Brothers and the steep decline in global stockmarkets while selling pressure intensified across most of the local equities. In fact, no equity registered a positive performance during the final three months of the year while three equities closed unchanged.
The biggest losers during the fourth quarter on the equity market were Datatrak Holdings (-34.5 per cent), Simonds Farsons Cisk (-26.9 per cent) and FIMBank (-22.2 per cent). On the other hand, trading in the bond market increased, as many investors sought to park their money in bonds in view of the uncertain evolving scenario.
The decline in the fourth quarter led to an annual decrease of 35 per cent for the MSE Share Index following the marginal increase in 2007. In the previous year, the Index eased by 2.2 per cent following the surge registered in the first quarter of 2006 on very heavy trading activity. The 2008 year-end Index level of 3,208.215 points represents a decline of 51.7 per cent from the peak of the bull market in 2006 when the Index had rallied to 6,641.873 points. The 2008 performance for the local market is similar to that recorded in the larger markets with the UK FTSE Index shedding 30.9 per cent, France's CAC 40 dropping 42.1 per cent, the US Dow Jones posting a 34 per cent loss and Japan's NIKKEI also down 42.1 per cent.
However the worst performance of the major markets was that registered by the Chinese stock market as its main index tumbled 65 per cent following the extraordinary gains in recent years. The declines all reflect the global economic recession and gathered momentum in rent months following the dramatic developments in the international financial markets mainly sparked by the demise of Lehman Brothers on September 14 - the largest bankruptcy in US history.
Turning back to the local equity market, MaltaPost was by far the star performer of 2008 as its share price climbed 63.6 per cent from its January 2008 IPO level. The only other positive performers were Grand Harbour Marina (+13.3 per cent), Plaza Centres (+10.8 per cent) and FIMBank with a marginal 1.6 per cent rise. Apart from MaltaPost, the only new addition of the year, RS2 Software, closed the year unchanged with the rest of the equities all closing negatively.
The worst performer of 2008 was GlobalCapital which plunged 64.5 per cent to close the year at €1.991, followed by BOV (-48.8 per cent), GO (-44.3 per cent) and HSBC (-42.1 per cent). Trading activity across the local equity market amounted to €48.8 million, a decline of 24 per cent or €15.4 million from last year's level attributable to the sharp downturn in volumes during the second half of the year. Meanwhile, the bond markets remained at the centre of attention as investors sought safer-heaven assets and protection in a falling interest rate scenario. Malta Government Stock prices rallied during the second half of the year as all major international central banks cut interest rates in the wake of the global economic recession.
The European Central Bank announced three rate cuts in the last quarter of 2008 bringing the official rate down by 175 basis points from 4.25 per cent to 2.5 per cent. These interest rate cuts and the "flight to quality" led to a significant drop in eurozone yields which was also reflected in the local government stock prices. In fact, the longest-dated stock, the 5.50 per cent MGS 2023 (I), gained 936 basis points during the year as the price rallied from 104.33 per cent to 113.69 per cent.
Similarly, the 5.10 per cent MGS 2014 (III) closed at 107.87 per cent, compared to the 2007 year-end price of 101.95 per cent and the prices of the fungible issues launched during the year of 99.45 per cent (in July) and 101.50 per cent (in October). The ECB is widely anticipated to reduce the benchmark rate further during the first half of 2009. This helped the benchmark German bunds gain 12.4 per cent this year as the yield of the 10-year German Bund ended the year at 2.95 per cent after touching 2.886 per cent - the lowest level since 1989.
Meanwhile trading activity in local corporate bonds surged during the final quarter of the year while the new bond issues were again immediately over-subscribed. The new bond issues in 2008 were of United Finance plc, Mediterranean Investments Holding plc and HSBC Bank Malta plc. Shortly before the end of 2008, Midi plc announced a 10-year bond with subscriptions opening in the new year. Midi is issuing a €30 million bond, available in both euro and sterling, with an option to increase the amount up to an equivalent of €10 million. The Midi bonds carry a coupon of seven per cent per annum and mature on December 15, 2018 at the latest.
The proceeds from this bond issue will contribute towards the final stages of the Tigné Point development. The price movements in the corporate bond market were erratic reflecting the lack of a market making mechanism and in certain instances the mixed performances of the bond issuers. The two HSBC bonds mirrored the increase in the MGS prices as the 4.6 per cent HSBC 2017 traded towards the par value while the recently-listed 5.9 per cent HSBC 2018 climbed 600 basis points. On the other hand, the 5.6 per cent GlobalCapital bond 2016 plunged from 90 per cent to 74.50 per cent and the seven per cent GAP Developments 2013 lost 800 basis points to close the year at 88.00 per cent.
2008 can also be remembered for the sharp swings in the currency markets. The sterling lost 24 per cent against the euro this year (the most since the euro's debut in 1999) as the deepening UK economic slump may prompt the Bank of England to cut interest rates further to support its economy continued. The sterling touched an all-time low of 97.32p on 25 December before closing the year at 96.7 pence. Meanwhile the US Dollar strengthened by 3.7 per cent against the euro during a volatile year. The US dollar started the year at $1.4587 per euro but after weakening to $1.5987, a rally in the greenback helped the currency rise to $1.2466, before a further slide to end the year at $1.4048.
With 2008 now in the history books, many would tend to ask for better fortunes in 2009. During the first half of 2009, investors will surely focus on the reporting season of the local companies (which lasts from February to April) seeking evidence of the impact of the global economic slowdown on the respective companies' profitability and business outlook. Dividend declarations will also play an important role especially in the light of the widening gap between the returns on Malta Government Stocks, Treasury Bills and bank deposits compared to the dividend yield on equities. Companies maintaining an attractive dividend for shareholders are likely to attract fresh support for their shares.
Meanwhile, with interest rates likely to continue to drop to historic lows, the bond market is expected to remain active with various new issues being launched commencing with the Midi bond issue. Hopefully trading activity on the secondary market for listed bonds will also rise as market players seek to increase the ease of buying and selling through the Malta Stock Exchange mechanism. This should be one of the key objectives for the New Year. All stakeholders stand to benefit from a more liquid Borża!
http://www.rfstockbrokers.com
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 final quarter was characterized by a steep decline in trading activity to a value of just under €6 million as buyers retreated from the market following the collapse of Lehman Brothers and the steep decline in global stockmarkets while selling pressure intensified across most of the local equities. In fact, no equity registered a positive performance during the final three months of the year while three equities closed unchanged.
The biggest losers during the fourth quarter on the equity market were Datatrak Holdings (-34.5 per cent), Simonds Farsons Cisk (-26.9 per cent) and FIMBank (-22.2 per cent). On the other hand, trading in the bond market increased, as many investors sought to park their money in bonds in view of the uncertain evolving scenario.
The decline in the fourth quarter led to an annual decrease of 35 per cent for the MSE Share Index following the marginal increase in 2007. In the previous year, the Index eased by 2.2 per cent following the surge registered in the first quarter of 2006 on very heavy trading activity. The 2008 year-end Index level of 3,208.215 points represents a decline of 51.7 per cent from the peak of the bull market in 2006 when the Index had rallied to 6,641.873 points. The 2008 performance for the local market is similar to that recorded in the larger markets with the UK FTSE Index shedding 30.9 per cent, France's CAC 40 dropping 42.1 per cent, the US Dow Jones posting a 34 per cent loss and Japan's NIKKEI also down 42.1 per cent.
However the worst performance of the major markets was that registered by the Chinese stock market as its main index tumbled 65 per cent following the extraordinary gains in recent years. The declines all reflect the global economic recession and gathered momentum in rent months following the dramatic developments in the international financial markets mainly sparked by the demise of Lehman Brothers on September 14 - the largest bankruptcy in US history.
Turning back to the local equity market, MaltaPost was by far the star performer of 2008 as its share price climbed 63.6 per cent from its January 2008 IPO level. The only other positive performers were Grand Harbour Marina (+13.3 per cent), Plaza Centres (+10.8 per cent) and FIMBank with a marginal 1.6 per cent rise. Apart from MaltaPost, the only new addition of the year, RS2 Software, closed the year unchanged with the rest of the equities all closing negatively.
The worst performer of 2008 was GlobalCapital which plunged 64.5 per cent to close the year at €1.991, followed by BOV (-48.8 per cent), GO (-44.3 per cent) and HSBC (-42.1 per cent). Trading activity across the local equity market amounted to €48.8 million, a decline of 24 per cent or €15.4 million from last year's level attributable to the sharp downturn in volumes during the second half of the year. Meanwhile, the bond markets remained at the centre of attention as investors sought safer-heaven assets and protection in a falling interest rate scenario. Malta Government Stock prices rallied during the second half of the year as all major international central banks cut interest rates in the wake of the global economic recession.
The European Central Bank announced three rate cuts in the last quarter of 2008 bringing the official rate down by 175 basis points from 4.25 per cent to 2.5 per cent. These interest rate cuts and the "flight to quality" led to a significant drop in eurozone yields which was also reflected in the local government stock prices. In fact, the longest-dated stock, the 5.50 per cent MGS 2023 (I), gained 936 basis points during the year as the price rallied from 104.33 per cent to 113.69 per cent.
Similarly, the 5.10 per cent MGS 2014 (III) closed at 107.87 per cent, compared to the 2007 year-end price of 101.95 per cent and the prices of the fungible issues launched during the year of 99.45 per cent (in July) and 101.50 per cent (in October). The ECB is widely anticipated to reduce the benchmark rate further during the first half of 2009. This helped the benchmark German bunds gain 12.4 per cent this year as the yield of the 10-year German Bund ended the year at 2.95 per cent after touching 2.886 per cent - the lowest level since 1989.
Meanwhile trading activity in local corporate bonds surged during the final quarter of the year while the new bond issues were again immediately over-subscribed. The new bond issues in 2008 were of United Finance plc, Mediterranean Investments Holding plc and HSBC Bank Malta plc. Shortly before the end of 2008, Midi plc announced a 10-year bond with subscriptions opening in the new year. Midi is issuing a €30 million bond, available in both euro and sterling, with an option to increase the amount up to an equivalent of €10 million. The Midi bonds carry a coupon of seven per cent per annum and mature on December 15, 2018 at the latest.
The proceeds from this bond issue will contribute towards the final stages of the Tigné Point development. The price movements in the corporate bond market were erratic reflecting the lack of a market making mechanism and in certain instances the mixed performances of the bond issuers. The two HSBC bonds mirrored the increase in the MGS prices as the 4.6 per cent HSBC 2017 traded towards the par value while the recently-listed 5.9 per cent HSBC 2018 climbed 600 basis points. On the other hand, the 5.6 per cent GlobalCapital bond 2016 plunged from 90 per cent to 74.50 per cent and the seven per cent GAP Developments 2013 lost 800 basis points to close the year at 88.00 per cent.
2008 can also be remembered for the sharp swings in the currency markets. The sterling lost 24 per cent against the euro this year (the most since the euro's debut in 1999) as the deepening UK economic slump may prompt the Bank of England to cut interest rates further to support its economy continued. The sterling touched an all-time low of 97.32p on 25 December before closing the year at 96.7 pence. Meanwhile the US Dollar strengthened by 3.7 per cent against the euro during a volatile year. The US dollar started the year at $1.4587 per euro but after weakening to $1.5987, a rally in the greenback helped the currency rise to $1.2466, before a further slide to end the year at $1.4048.
With 2008 now in the history books, many would tend to ask for better fortunes in 2009. During the first half of 2009, investors will surely focus on the reporting season of the local companies (which lasts from February to April) seeking evidence of the impact of the global economic slowdown on the respective companies' profitability and business outlook. Dividend declarations will also play an important role especially in the light of the widening gap between the returns on Malta Government Stocks, Treasury Bills and bank deposits compared to the dividend yield on equities. Companies maintaining an attractive dividend for shareholders are likely to attract fresh support for their shares.
Meanwhile, with interest rates likely to continue to drop to historic lows, the bond market is expected to remain active with various new issues being launched commencing with the Midi bond issue. Hopefully trading activity on the secondary market for listed bonds will also rise as market players seek to increase the ease of buying and selling through the Malta Stock Exchange mechanism. This should be one of the key objectives for the New Year. All stakeholders stand to benefit from a more liquid Borża!
http://www.rfstockbrokers.com
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.