Economic concerns impact global equity markets

The Malta Stock Exchange index last week remained fairly un­changed with very moderate daily movements. This is a direct reflection of the performance of most local equities which saw minimal changes intra-week. The index closed at 3,374.218, a very modest 0.10% decline from the previous week’s close, but it has now fallen by a hefty 10.8% since January.

Despite last week’s fall, the MSE outperformed most equity markets abroad which were quite jittery, with investors assessing whether the markets have reached a bottom following several weeks of steady declines.

Once again, most global equity markets ended the week considerably in the red, with the Dow Jones Industrial Average experiencing the longest weekly slump in over eight years amid concerns that the global economy is slowing.

Interestingly, the local equity market has been fairly active, with over 386,700 shares traded notwithstanding the holiday-shortened week. Trading was also spread among a considerable number of equities.

Of the 11 traded companies, four sold off moderately, three displayed strength, while a further four closed the week unchanged.

Unusually high traded volume occurred in Fimbank plc with nearly 172,000 shares changing ownership solely in Thursday’s session. In spite of this heavy trading, the share price remained intact at $0.80, nearly 16% below its initial share price back in early January.

This equity’s share price has been constantly dragged lower at least since the onset of the global recession three year ago. This year’s losses therefore further exacerbate the losses accumulated over the previous years.

Trading in Bank of Valletta plc shares was also very active last week with just over 89,000 shares changing hands. The share price ended the week unchanged at €2.74 notwithstanding a very minor mid-week blip.

This equity is still underperforming the general market by 4%, having shed 14.7% since January. Nearly all gains achieved since October 2010 have now been gradually eroded following the ongoing downward spiral initiated during February.

A total of 37,000 Maltapost plc shares were traded last week, mostly on Friday. However, trading backed the previous week’s closing price of €1.02 which therefore remained unchanged.

A total of 34,165 HSBC Bank Malta plc shares were exchanged last week. The share price fluctuating slightly between a low of €2.94 and a high of €2.97 at which it closed the week.

Last week’s 0.68% gain slightly reverses the moderate share price losses suffered at the beginning of the month.

Trading in RS2 Software plc shares remained above average last week at 26,500 shares, which were exchanged at the previous week’s closing price of €0.499.

Trading volume was lighter for Malta International Airport plc, barely surpassing 16,000 shares. However, the share price was upped by €0.01 to close the week 0.58% higher at €1.74.

Last week’s climb resulted in MIA being the top performing local equity year to date, having risen 4.82% since January. MIA an­nounced last week that passenger movements in May grew by 5.8%.

Following several weeks of sturdy volume, trading in Go plc somewhat dried up last week as just under 8,500 shares were transacted in all.

This minimal trading led the share price to fall 0.65% from €1.379 to €1.37 by Friday.

Following the significant de­cline in this stock till mid-May, the share price reversed direction, yet did so with diminishing mo­mentum as gains were re­duced on a weekly basis.

Nevertheless Go plc has climbed almost 5% above the all-time lows recorded a month ago, with the gains being backed by significant volumes.

Go announced last week that all resolutions on last week’s AGM agenda had been approved.

Very low volumes led to declines in the share prices of Lombard Bank plc, International Hotels Investments plc and Midi plc. On the other hand, Middlesea Insurance plc’s share price rose 1%, yet trading was minimal.

Trading in the local corporate bond market increased in value last week, reaching €423,509. Bond price movements were generally subdued except for two bonds which rose steeply last week. The 6.25% Corinthia Finance plc maturing between 2016 and 2019 closed the week at €100, a 7.5% weekly improvement.

Similarly, the 6.25% International Hotel Investments plc bond maturing between 2017 and 2020 jumped by a staggering 8.7% last week to close at €100.

Price movements in the local government bond market have remained fairly subdued week after week.

Benchmark government bond prices have been stuck over several weeks given an ongoing battle between downward pressure on prices on the possibility of higher interest rates and the opposite effect resulting from the rush to safety following complications arising due to European sovereign debt problems.

Although the general trend has been towards lower government bond prices, declines have been very subdued due to the current uncertainties, primarily reignited by Greek problems.

On Thursday the European Central Bank (ECB) left its main lending rate at 1.25%, despite ECB president Jean-Claude Trichet’s warning that the bank is being strongly vigilant towards inflation risk, thus indicating a possible rise next month.

A total of €5 million was traded last week in local government bonds, with the vast majority of these deals concentrated in the 7.8% MGS 2012 issue.

Last week a total of €1.4m were traded in Treasury Bills.

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 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.