A tumultuous six months for local equity market

The volume of trading on the Malta Stock Exchange fell by half when compared to the average over the past weeks. Just over 155,000 shares changed hands during the holiday-shortened week, with sharp drop in trading in the two largely capitalised banks.

The negative trend persisted with the MSE index falling a further 0.32% to reach 3,334.039 by the end of Friday’s session. Although there was trading in nine listed companies’ shares, the volume was minor in seven of them. Notwithstanding this, there were some very volatile share price movements, with a very hefty loss in the share price of Global Capital plc.

HSBC Bank Malta plc was the only company with a positive week-on-week change, ending Friday’s session 0.7% higher at €2.92.

Last week marked the end of the first half of the year. The local equity market has been buffeted by several storms during the past six months, with several factors affecting equities mostly negatively, to different extents.

A string of continuous downbeat events led the MSE index to slide by a hefty 12% over the period, with the fall occurring primarily from February to May, abd remaining fairly flat throughout June. This loss erased most of the steady climb experienced towards the end of 2010 and last January.

These negative events varied from company-specific, to sector and country-specific, culminating in a heavy under-performance of the local index when compared to most equity indices abroad. The main adverse events included issues surrounding the Bank of Valletta property fund, the general negative momentum surrounding the global financial equities, and the ongoing Libyan and Greek crises.

On the other hand, despite this turmoil, some stocks managed to outperform significantly, ending the half year in positive territory primarily due to consistently satisfactory reports.

The nearly continuous selling pressure on the local market was backed by hefty trading volume throughout the whole period, indicating conviction of local investors.

The local equity market movements were very disconnected from those of global equity markets, most of which moved in a manner very comparable to each other during the past six months. Generally, equities abroad improved till mid-March after which several factors, including the Japan earthquake and ensuing tsunami and nuclear meltdown led to a sharp global correction. Recovery was immediate upon hints of steady global growth, but the re-emergence of the Greek crisis brought most equity markets sharply back down in June.

Ultimately most developed countries’ equity indices gained between three and six per cent over the first half of the year.

A usually fairly stable market, the local corporate bond market was, however, not immune from the local risk aversion, with some bonds seeing drastic volatility, particularly with the unfolding of the Libyan crisis. As months progressed and the Libyan issue was put on the backburner, most bond price losses were gradually retraced. Trading volume in bonds was also very hefty at times, especially during the peak of the crisis.

Malta Government Stock prices mirrored benchmark German government yields and prices, with most government bond prices remaining overall stable over the past six months. Slight gains during equity downturns were often wiped away by gradual falls when equities improved, given the contrarian effect of such instruments.

Total trading in local government stocks last week slightly surpassed the €2 million mark, while trading in corporate bonds amounted to nearly €790,000.

HSBC Bank Malta plc, the largest equity on the MSE in terms of market capitalisation fell a significant 11% since January. The share price imploded sharply earlier this year after the 2010 financial results were announced. Despite an increase in profits most investors were unconvinced. During the past months the share price has remained somewhat stable, but volume dried up drastically as local investors concentrated their trading on other equities.

Bank of Valletta plc’s movement was similar to that of HSBC’s, yet the loss was slightly worse. The stock fell 16% upon hefty volumes on a weekly basis. The La Valette Multi Manager Property Fund issue notably dampened investors’ mood over the past months.

Last week the equity represented 32% of total shares traded with activity increasing following the bank’s announced that its conditional offer to investors in the property fund was accepted by 94.4% of investors in the fund.

International Hotel Investments plc suffered sharp losses due to the Libyan crisis which exploded in mid-March. Although some of the losses were reversed the share price is still down 13% since January, and given IHI’s large market capitalisation this heavily influenced the overall index.

Similarly, Go plc was somewhat hit by international developments due to its business connections with a Greek company and the overall negative vibe surrounding Greek debt. Go’s share price was knocked sharply lower, shedding nearly 29% of its value.

Malta International Airport plc and Maltapost plc were among the few stocks to end the period in positive territory albeit only slightly. Both trading volume and news flows were encouraging throughout the past months for the two companies. Last week trading in MIA was on the high side with nearly 80,000 shares changing hands within the price range of €1.68 and €1.71.

Overall the worst performing stock over the past six months was Global Capital plc, having shed 67% of its value. The best performing stock was RS2 Software plc, which climbed a very encouraging 10.4% to end the period at €0.53. Plaza Centres plc and Lombard Bank plc were the only other two companies to end the six months in positive territory.

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.