Flurry of activity in local government bond market

Last week saw a flurry of activity in the local government bond market, counterbalancing the lack of activity in equities. There was nearly €20 million worth of trading in the market, €17m of which were traded solely in the 5.25% MGS 2030 issues, the prices of which increased 3.5% to close the week at €104.60.

Such heavy trading followed a further drop in benchmark European yields, which fell to record lows. Lower yields imply record high benchmark government bond prices (German Bunds), resulting in a direct knock-on effect on the local government bond market. Indeed, most local government bonds traded reached new highs, particularly the longer-term bonds, with weekly price changes of well above 1.5%.

The Malta Stock Exchange index spent most of last week in a sideways drift as trading volume fell and share price changes were minimal. Overall, the index rose but the gain was trivial as local buyers and sellers fought for direction. The index closed Friday’s session at 3,477.646, which translates into accumulated gains of barely 0.5% over the past eight months.

Unlike previous weeks, trading in Fimbank plc dried up completely last week and traded volume fell to a total of 175,295 shares. This is further indication of lack of conviction and willingness to take part in local equity market activity. This is partly because of seasonal factors and due to a lack of clarity regarding both general and specific economic factors.

Having said this it is worth highlighting that the local index has nevertheless outperformed most foreign indices which have fallen significantly over the past two weeks.

Last week, nine equities were traded, four of which saw their share price rise, two remained unchanged, while the shares of the remaining three equities fell in value, nearly cancelling out the positive effect of those that appreciated.

The most widely traded equity last week was Malta International Airport plc, with just over 51,000 shares changing hands over 16 deals. The share price closed Friday’s session at €1.56, or 1.27% lower. This equity has therefore maintained its month-long slow retreat, having fallen gradually from a high of €1.62 in mid-July.

Bank of Valletta plc and HSBC Bank Malta plc traded in an identical fashion throughout the week except for Friday, when these equities closed in opposing directions. BoV shares ended the week with a spike in price while HSBC shares gave up 1% by the end of the session.

BoV gained 1.23% over the previous week’s close while HSBC fell further in the red by 1.03%. The year-to-date performance of these stocks therefore continues to diverge. However, trading volume in both equities was lower last week.

On the other hand, there was unusually high activity in Plaza Centres plc as 36,000 shares were traded last week, the highest weekly volume for the past year for this particular stock. This trading occurred solely during Friday’s session, upping the price by 1.23% to €1.65. This equity’s share price has therefore risen over 8% since the beginning of June, cancelling all its losses year-to-date.

Middlesea Insurance plc was last week’s best performer as its share price soared 6.8% above the previous week’s closing price, ending Friday’s session at €1.10. However, volume was very low. In total, less than 10,000 shares were traded solely in Monday’s session. Last week’s performance has boosted this equity’s year-to-date performance even further and is now the second best performing stock on the local market this year, with a whopping 36.8% gain.

Low trading led Go plc shares to shed 0.5% and Maltapost plc to gain 0.6%, while both Lombard Bank plc and Simonds Farsons Cisk plc ended the week unchanged. Last week, Lombard Bank plc issued its interim directors’ report for the six months ending June 30, details of which appear on page 75.

On Thursday, Global Capital plc issued a company announcement detailing the half-yearly performance for the period ended June 30, 2010. The company registered a net loss after tax of €1.4m compared to a loss of €2.3m for the corresponding period in 2009. The directors are not recommending the payment of an interim dividend.

The company also announced that it has entered into an agreement for the sale of its entire shareholding the Metropolis. The group’s results have been adversely impacted by a charge arising from the share of loss of the associated undertaking, Metropolis Developments Ltd. Further details appear on page 76.

6PM Holdings plc’s board of directors also issued the company’s half-yearly results for the period up to June 30. The group registered a pre-tax loss of £209,729 compared to a loss of £23,378 in the first six monthsof 2009. The directors said the results continued to reflect extremely adverse trading conditions, however they believe their efforts to engage in the private sector will bear fruit by the end of the financial year.

Late on Friday, Grand Harbour Marina plc issued its interim results for the period ending June 30. While revenue for the period increased by 14%, overall expenses also increased, resulting in a loss after tax of €463,157, compared to a loss of €168,167 in the same period last year.

Just over €2.5m worth of local corporate bonds was traded last week, the bulk of which was concentrated in the 8% Bank of Valletta US$ 2010 bond. Most of the prices of corporate bonds transacted last week were practically unchanged except for the 7.15% Mediterranean Investments Holdings plc USD bond maturing between 2015-2017, which rose by 1.5% in value. On the other hand, the price of the 6% Simonds Farsons Cisk plc bond maturing between 2017 and 2020 fell by 1.21%.

No treasury bills were traded last week.

This article, which was compiled by Jesmond Mizzi, joint managing director of Atlas JMFS Investment Services Ltd, does not intend to give investment advice and the contents therein should not be construed as such. Atlas JMFS is licensed to conduct investment services by the MFSA and is a member firm of the Malta Stock Exchange. 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 Atlas JMFS at 67/3, South Street, Valletta, or on Tel: 2122 4410 or e-mail jesmond.mizzi@atlasjmfs.com.