MSE index turns negative

Following weeks of tepid moves, the Malta Stock Exchange index closed the last week of May in a negative mode, wiping out some of its earlier gains. The uncertainties and volatility in most equity indices abroad seemed to have finally impacted the local market, albeit on a moderate scale, and despite a mid-week rebound in global markets.

Falls in the banking sector may also have resulted following the publication of the Financial Stability Report 2009 by the Central Bank of Malta, which concluded that "going forward, and also in view of the foreseeable tightening of international capital and liquidity standards, banks may need to reassess their dividend policies with a view to strengthening their capital base, both in terms of quality and quantity".

Downward moves in the major banks' share prices coupled with some possible profit-taking in other equities dragged the index below the 3,500 mark, ending the week 1.09% lower than the previous week.

Volume traded last week was also slightly lower, with 267,286 shares changing hands across 132 deals. Of the 13 equities whose shares were traded, five outperformed the overall index and ended in positive territory. But the equities of another five - most being heavyweights in capitalisation terms - lost value while the remaining three ended the week unchanged.

Barring Monday's session, Bank of Valletta plc shares traded in the red for the entire week, with the slide in the share price gathering momentum as the week progressed. Just over 45,000 shares were traded last week, with the great majority of this volume backing the falling prices. The previous week's gains were therefore erased as sellers reaffirmed control, bringing the share price down 3.6% to close last Friday at €3.25.

The most widely traded equity last week was HSBC Bank Malta plc, which saw a jump in volume traded from previous weeks. However, this higher volume resulted in a lowering of its share price from €3.06 to €3.03. This 0.98% fall was much milder than that of its major counterpart. Nevertheless, last week's decline has added to this equity's year-to-date losses which now amount to 6.2%.

Similarly to the above and unlike previous weeks, International Hotel Investments plc (IHI) saw a flurry of activity last week with just over 41,000 shares being traded on the exchange. IHI was one of last week's gainers as it garnered support from buyers following the previous week's hefty decline. The share price closed Friday's session at €0.83 after reaching a weekly high of €0.85.

There was also unusually high trading in Medserv plc as 26,200 shares changed ownership over six deals. The share price was upped 1.18% from €4.25 to €4.30.

Middlesea Insurance plc shares saw some profit-taking last week following the previous week's spike. Nevertheless, last week's falls were moderate, with the share price closing Friday's session at €0.855, leaving most of the previous week's gains intact. The year-to-date performance is a positive of 6.34%.

It is also fair to note that last week's volume was half that of the previous week - possibly a bullish sign given the moves registered over the past two weeks.

RS2 Software plc's share price extended the previous week's gains to end Friday's session at €0.53, or 3.31% higher. Last week's gains helped erase all this equity's losses since mid-January this year, but it is still nearly 5% below its closing price at the end of 2009. A decent volume of 19,150 shares was traded last week.

Following weeks of non-movement, Go plc's share price surprisingly fell last week, as it was hit by a fresh bout of selling pressure. The equity fell 1.89% to end the week at €2.08, erasing all the year's gains and entering negative territory for the first time this year.

Most of these gains had been achieved with sharp upswing moves in January. But for the past five months selling pressure has been dragging the equity price slowly but steadily lower. Volume was generally low for this equity with only 19,000 shares being traded last week.

Maltapost plc's share price registered its first drop since mid-March as investors took some profits following the 20% surge of the past months. Nevertheless last week's 3.33% fall was only backed by 10,764 shares, a far cry from previous volumes traded in this equity.

Simonds Farsons Cisk plc's share price improved 2.78% last week, pushing the price up to €1.85.

Low trading volume resulted in a 6.6% jump in the share price of 6pm Holdings plc's - the week's best performing equity. On the other hand, Lombard Bank plc, Malta International Airport plc, and Santumas Shareholdings plc kept their prices unchanged on low volumes.

In an interim directors' statement last week, Lombard Bank directors said the bank's balance sheet figures remain robust, with the relative financial ratios well above the statutory minimum requirements. Notwithstanding the turbulence in Europe, the directors remain confident that the bank will attain the profit levels forecast for the half-year term.

Last week, nearly €900,000 worth of local corporate bonds was traded on the local exchange, with most prices remaining fairly unchanged.

Hotel San Antonio plc announced last week that as at December 31, 2009, the company had not set up a capital reserve fund to cover the redemption of its 7.5% bonds maturing on May 30, 2012, as had been defined by the offering memorandum of these bonds. However, the company said it is collaborating with its bankers to secure the required financing.

As international markets turned around towards mid-week, most benchmark yields moved upwards while their respective government stock prices edged lower from their all-time highs. Indeed, this correction was highly expected given the hefty upward moves over the past month or so.

As is often the case the longer-denominated Malta Government Stocks saw the larger volatility and registered the larger (albeit moderate) fall in prices. Value traded amounted to €3.2m.

A total of €14m was traded in Treasury bills last week.

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, on Tel. 2122 4410 or e-mail jmizzi@jmfs.net.