Equities, gold continue rally

International equity markets continued to rally last week as signs of economic recovery continue to emerge. Standard and Poor's 500 in New York gained another 2.5% last week, extending its gains for the year to just over 18%. Meanwhile, the FTSE Eurofirst 300 index gained 1.3% last week to rise above the 1,000 level for the first time in 11 months.

The price of gold rose to an 18-month high, reaching $1,023.85 a troy ounce, just short of the record high in March 2008.

Meanwhile, the US dollar fell to fresh lows last week as the appetite for risk increased and investors sought higher returns elsewhere. Against the euro, the dollar fell last week to a one-year low at $1.4704, while sterling fell 2.4% against the USD to $1.6280.

On the other hand, the euro rose to a four-month high against sterling to £1.6280 as it fell 3.3% on the week as expectations grew that the Bank of England would hold interest rates at record lows for a long time.

The Malta Stock Exchange (MSE) index continued to underperform most major indices this week, unmoved by the overall optimism surrounding most equity investments worldwide. Indeed, the MSE last week had a disappointing performance, with the index gaining in only a single trading session. The index shed a further 0.89% to close at 3,005.464. This weakness led the index to once again approach the 3,000 mark, nearly erasing all the past months' gains.

A total of 89,558 shares were traded last week, spread over 83 deals, with very light trading in the initial trading sessions. The bulk of trading occurred in the two largely capitalised banks, with the remaining volume spread thinly among eight other equities.

Generally speaking, volatility in the equity price movements was low, with the best gainer climbing only 1% and the worst performer losing 5.1%. A single equity posted a rise, another remained unchanged while eight others saw their share prices fall in value.

As has been the case for most of the summer, Bank of Valletta plc (BoV) shares continue to be the most traded equity, both in volume and value terms. The share price was mixed throughout the week, but it closed at €3.02, or 1% higher, hence registering a new closing high for 2009, after considering the bonus issue. A total of 51,069 shares changed hands in 45 deals. The share price oscillated between €2.96 and €3.03. BoV is now the only equity on the MSE in positive territory this year, posting solid gains of nearly 4.5% year-to-date.

By contrast, HSBC Bank Malta plc's share price gained downward momentum as the week progressed. The price drifted 1.87% lower, ending the week at €2.62, its weekly low. A total of 23,410 shares were traded in 19 deals. On a year-to-date basis, HSBC has clearly underperformed its main competitor, having lost nearly 3%. However, from a broader perspective, HSBC is still outperforming the overall MSE index, which has declined 6.3% so far this year.

Malta International Airport plc (MIA) shares stumbled into the red last week, closing 3.64% lower at €2.12, following a light volume of shares sold during the first three trading sessions. MIA's share price is therefore continuing to lose ground following a long stretch of being unchanged at €2.35.

Lombard Bank plc shares edged €0.009, or 0.35% lower last week, following four deals involving 2,380 shares on Friday. The equity closed the week at €2.54.

Similarly, Go plc shares dipped 0.59% last week, following a single deal of 1,100 shares.

The share price fell to €1.69, a level not reached since May.

Single deals in Middlesea Insurance plc and Plaza plc shares led to a faltering of the prices of these stocks, with the former losing 0.61% and the latter falling 0.55%. Last week's losses led to further worsening of both these companies' performance year-to-date.

Simonds Farsons Cisk plc came under a bout of selling pressure last week, closing the week 5.06% lower at €1.595, clearly the worst performer of the week, albeit following minimal volume of shares traded on Tuesday.

Fimbank plc shares fell nearly 3.5%, following a drop in the share price from $1.295 to $1.25. However, volume was minimal.

Maltapost plc remained unchanged at €0.69, notwithstanding a deal of 2,044 shares on Friday.

Although the MSE saw very limited trading in equities this week, the opposite was true for Malta Government Stocks (MGSs). Benchmark German Government Bonds lost ground this week, as a shift of focus occurred from safe stocks to high-risk equities.

The fall in government bond prices was mirrored locally (unlike what happened in equity markets), with most of the traded MGSs drifting lower over the week. Value traded was much higher than in previous weeks, amounting to almost €11.4 million over 66 deals. However, the bulk of this volume occurred in the 3.6% 2013 (IV) FI June 2009 issue.

Similarly, traded volume in the corporate bond market exceeded that of last week with total value amounting to more than €1.3 million. A significant portion of these traded bonds lost some value this week, with the worst performer being the 6.7% Mizzi Organisation Finance plc 2009/12 bond, which fell nearly 2%.

Trading in the Treasury Bill market this week amounted to nearly €6.3 million.

This article, 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, Tel: 2122 4410 or e-mail jmizzi@jmfs.net.