Focus turns to bonds

Share sell-offs in International Hotel Investments plc (IHI), Maltapost plc and Fimbank plc dragged the Malta Stock Exchange (MSE) index significantly lower this week, with the very few positive performing equities failing to neutralise the overall negative effect. Trading volume was even lower than in previous weeks, partially explained by the typical summer lull, besides lack of major market moving catalysts.

Investors instead focussed their attention on the Malta Government Stocks issue and the two new corporate bond issues which will be available as of next week. On Friday, the Treasury announced it had received 1,129 applications worth a total of over €129 million for the 3.6% MGS 2013 and 5.2% 2021 issues.

All subscriptions by members of the public, amounting to €19,867,600 will be accepted in full while the offers by the institutional investors will be allotted in the order of the bid price offered.

Trading volume in government bonds was higher this week, with most of it taking place in the 5.75% 2010 stock. A total of €6.946 million worth of stock was traded across 37 deals, with prices maintaining their upward momentum as focus shifts from equities to safer government bonds. In the Treasury bill market this week a total of 23 deals worth nearly €7.3 million took place.

In the corporate bond market there were 58 deals valued at just over €390,000. The best performing bond this week was clearly the 7% Gap Developments plc euro bond, which improved by nearly 1.08%.

IHI announced on Friday that the pre-placement agreements with financial intermediaries was concluded and was oversubscribed. Applications for the €30 million 6.25% bond issue, which matures between 2015 and 2019, will open to the public on Tuesday.

Meanwhile, applications for Tumas Investments plc's €20 million 6.25% bond issue, maturing between 2014 and 2016, will open on Friday, while the pre-placement agreements with intermediaries will be placed on Wednesday.

The MSE index started the week well but gave up all the gains throughout the week and ended with a significant 3.09% loss. By the end of Friday's session the MSE had once again dipped below the 3,000 mark to close at 2,941.592 points. This was the second week in a row that the index posted losses, and the downward momentum is gathering pace. The MSE's recent weakness means that as the first six months of trading came to an end the index is underperforming most major worldwide indices, with its year-to-date loss is now at 8.31%.

It was a negative week for most international indices, with the CAC 40 in Paris, the Xetra Dax in Frankfurt and the FTSE 100 in London all ending down. The central banks' concerns that the economic recovery's 'green shoots' are thin on the ground has wiped off all the year-to-date profits and returned the indices to negative territory.

In the US, the Nasdaq Composite was the only positive performer this week, as the Dow Jones Industrial Average and the Standard and Poor's 500 fell minimally.

Returning to the MSE, a total of 81 deals were carried out in the equity market this week with a market value of circa €168,000. These were generally spread out between 10 equities, two of which increased in value; another two remained unchanged, while the remaining six fell into the red.

Looking at this week's best and worst performing equities, the same pattern as last week emerged, with Go plc once again clearly outperforming all other equities, and IHI experiencing sharp pull-back.

Just over 23,000 Bank of Valletta plc (BoV) shares - a quarter of this week's trading in volume terms - changed ownership in 25 deals, with the equity's price closed the week unchanged at €2.65. The price fluctuated between €2.67 and €2.63 during the week, with gains on some days nullified by drops in subsequent trading sessions.

Maltapost plc (MTP) was the second most traded equity in volume terms this week, with the equity being the MSE's worst performer on Monday when it shed nearly seven per cent of its value. However, the bulk of trading took place on Tuesday resulting in a further dip in its closing price. Overall, MTP lost 8.31% this week, with its half-yearly price loss now nearly 21%.

Similarly, Fimbank plc (FIM) shares took a pounding this week, ending Friday's session at $1.18, or 7.09% lower than last week. The bulk of the loss occurred in Tuesday's session, and further deterioration was experienced in subsequent sessions. FIM has lost slightly more than 20% of its value in the first six months of the year.

Go continued to perform well this week as its share price soared a further 3.43%, closing the week at €1.81, a level not seen since early February. However, trading was sporadic with 16,300 shares traded across 10 deals. Overall, the equity's half-yearly performance is once again positive with a 3.31% gain since its December 30, 2008, closing price.

HSBC Bank Malta plc was another outlier in an overall negative market, ending the week at €2.60, or 1.96% higher. A rebound in Friday's trading erased losses in earlier sessions. A total of 11,485 shares were exchanged in 15 deals, a minimal amount considering typical trading volumes in HSBC shares.

Over the past two weeks, the price gains that had been slowly achieved in IHI throughout May have been quickly erased. This week's trading led to a heavy loss of nearly 16%. However, this downward trend was not backed by heavy volume, as only 6,280 shares were traded in seven deals. IHI was nevertheless a significant drag on the whole index given the company's large market capitalisation.

Minimal trading in both Lombard Bank Malta plc and Simonds Farsons Cisk plc (SFC) resulted in losses for both equities. Lombard lost 1.16% ending the week at €2.55, while SFC slipped a further 2.70% to close at €1.80.

Similarly, Malta International Airport plc's share price fell gradually this week to close at €2.092, or 0.38% lower.

A single deal in Global Capital plc failed to cause any price movements, with the equity closing unchanged at €1.50.

This article, which was compiled by 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.