Local stockmarket fails to mirror global equity rally

Despite leading indices in international equity markets gaining between two and five per cent last week, this was not reflected locally, with the Malta Stock Exchange starting March subdued, though not as negative as at the end of February.

Initially, the MSE index experienced what is often referred to in Wall Street jargon as a 'dead-cat bounce', referring to a small and brief recovery in stock prices following hefty falls. But selling pressure prevailed in every subsequent trading session, totally eroding this 'bounce', with the index closing the week at 3,603.560, a minimal 0.46% loss over the previous week.

There was a spike in the volume of shares traded, but most were concentrated in Maltapost plc shares. Trading in the remaining equities was anaemic, particularly compared to earlier this year.

In total, 583,528 shares changed hands last week over 193 deals in 13 equities, four of which gained value, five lost ground, and four closed unchanged.

The bulk of trading last week - 410,624 shares - was in Maltapost plc, spread over the whole week. Its share price climbed steadily from €0.759 to €0.80 by mid-week but closed €0.02 lower at €0.78, a 2.77% improvement over the previous week. Maltapost is currently among the top performers with its share price up 11.43% year-to-date.

HSBC Bank Malta plc initially rebounded following last week's heavy sell-off. The share price soared 2.7% on Monday, but this gain was eaten away as the week progressed with the share price closing 0.30% down at €3.29. Worth noting is the fact that on Tuesday the equity went ex-div (the first date when buying a stock does not entitle the new buyer to the declared dividend).

Volume was much lower than earlier this year with investors preferring to stay on the sidelines following this equity's sharp volatility over the past two months.

Similarly, trading volume in Bank of Valletta plc shares was unusually low last week, with just over 47,000 shares traded haphazardly throughout the week. The bulk of this trading backed a downward move on Wednesday, negatively influencing the overall weekly performance. The share price fell 1.63% from last week's close of €3.365 to €3.31. Investors seemed to be more interested in the BoV bond issue tomorrow.

In contrast to the major banking equities, Go plc's share price has been immune from tectonic movements. Once again last week, its share price remained flat, with minimal fluctuations around the €2.29 level. The equity closed Friday's session €0.009 lower, yet volume was shallow throughout the week as barely 23,000 shares changed hands.

Following some weeks of directionless trading, Malta International Airport plc's share price resumed take-off, climbing to the €3.05 level backed by fair volume. Nearly 28,000 shares were traded in 15 deals, which is above average for this stock. MIA has improved by a very encouraging 27% since the start of the year.

Minor trading led to Middlesea Insurance plc shares edging slightly lower this week, shedding 1.33% to close at €0.74. There was no change in the prices of shares in International Hotels Investments plc, Fimbank plc, Santumas Shareholdings plc and Island Hotels Group Holdings plc.

Minimal trading resulted in a hefty five per cent hike in the share price of Loqus Holdings plc (formerly Datatrak Holdings plc) and a significant 5.66% loss in RS2 Software plc. Meanwhile, Grand Harbour Marina's share price improved 1.6% on a single trade dealt at €2.60.

There was €490,000 worth of trading in corporate bonds with mixed price changes. The 7% GAP Developments euro bond improved the most, rising over one per cent above the previous week to close at €94.

As was expected, two new bond issues were announced last week following approval by the listing authority as investors' appetite for corporate bonds continues to be strong.

Premier Capital plc will be issuing €20 million worth (subject to an over-allotment option of €5m) of unsubordinated and unsecured bonds maturing between 2017-2020 and having a coupon of 6.8% per annum. The group mainly operates McDonalds's restaurants in Malta, Estonia, Latvia and Lithuania.

Net proceeds from the bonds will be used mainly to acquire and develop land or convert premises into McDonald's restaurants and to remodel the group's current McDonald's restaurants into hybrid McDonald's restaurants and McCafes. Part of the bond proceeds will be used to part-refinance the group's existing bank debt of €7.6m.

Similarly, International Hotels Investments plc (IHI) announced the issue of €25m worth of unsubordinated and unsecured bonds maturing between 2017 and 2020, offering a coupon of 6.25%. The bond proceeds are earmarked for the five per cent IHI redemption and for the repayment in full of an existing loan facility.

Preference will be given to holders of the maturing bond, shareholders and bondholders of Corinthia Group listed companies, namely IHI, Corinthia Finance plc and Mediterranean Investments Holding plc.

Uncertainties in European markets led to further falls in government bond yields as investors in general expect interest rates, particularly in Europe, to remain subdued for a longer period of time.

This led to higher Malta Government Stock prices, with longer-term stocks reporting the highest gains. Nearly €27m worth of MGS was traded, the bulk of which was in the 5.9% MGS maturing in 2015. Just under €27m worth of government bonds were traded last week, spread over 18 issues.

This article, which was compiled by Jesmond Mizzi, managing director of Jesmond Mizzi Financial Services Ltd (JMFS), does not intend to give investment advice and the contents therein should not be construed as such. JMFS is licensed 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, call 2122 4410 or e-mail jmizzi@jmfs.net.