Investors struggle to find direction

Markets last week remained under pressure as investors continued to sense that global economic growth will be hampered by the euro area’s ongoing debt problems.

Spanish banks seem to be the next casualty. Last week, the Spanish government bought a 45 per cent stake in Bankia, the nation’s fourth-biggest lender. Spain’s distressed property sector has weighed heavily on Spanish lenders’ balance sheets since the property boom came to an end and the government has struggled to shore up the country’s banks.

On Friday, the Spanish govern­ment said it remains committed to clean Spanish banks from toxic loans. But this failed to lift equities or the euro as Greece’s political turmoil continues to haunt investors.

Financial equities were among the most volatile last week in Europe and the US as a surprise $2bn trading loss announced on Thursday by JP Morgan Chase & Co, the biggest US bank by assets, shocked the markets and sent banking equities lower after close of US markets. On Friday, European markets were down but managed a late recovery after positive US consumer confidence data.

The negative sentiment surrounding markets last week did little to lift the euro as the single currency remain under selling pressure. Both the US Dollar and the Sterling continued to benefit from the recent flight to safety as investors shun global equities in favour of safer alternatives. Moreover, the yield on the German 10-year bund fell, while risky periphery countries, such as Greece, saw their bond yields moving higher as the sell-off intensified.

The Malta Stock Exchange lack­ed direction and closed the week flat at 2,978.843 points as investors seem­ed hesitant where to head to. On Thursday the MSE index shed almost 1% after two flat trading days, while on Friday it closed higher to lift the index from negative ground.

Trading value fell by more than half that traded in the previous week, as €0.6m was traded in nine equities. Trading was driven mainly by inves­tors’ reaction to market updates as more financial results and first-quarter announcements where released.

Go plc’s share price was a case in point. Ahead of its annual general meeting on Wednesday, the company’s equities edged minimally higher, on low turnover. But after the AGM, investors pushed the equity to a weekly high of €0.76, and it closed the session at €0.75 on improving volumes. The company announced that properties worth €11.6m will be handed over to the government, subject to parliamen­tary approval. Despite retreating slightly on Friday, Go ended the week with a 4% gain at €0.74. Last week, Go’s turnover reached €49,000 over 30 deals.

Lombard Bank plc shares closed 1.3% or €0.03 lower at €2.37, probably in reaction to a fall in profits announced by Maltapost plc in which the bank holds a stake. Two deals worth €19,000 were executed.

Maltapost plc’s price failed to move notwithstanding the company’s announcment of lower profits for the six months ended March 31. Pre-tax profit reached €796,000, well short of last year’s €1.69m; however, turnover rose 3.1% or €11m, up from €10.7m in 2011.

Bank of Valletta plc shares had an uneventful week closing all five trading days at €2.12, despite trading at a high of €2.15. On Monday BoV traded for the last time with entitlement for the next dividend, hence turnover was the highest for the week. But turnover dried up in the final three trading days, while the equity’s price stayed firm at €2.12.

HSBC Bank Malta plc shares initially started the week with an upbeat momentum carried over from the previous week. This despite an article in a local newspaper suggested that the bank might consider leaving the island. The bank rejected the report early in the week, saying it plans to continue investing further in its local operations. Some inves­tors were unconvinced and sent the equity to a low of €2.50 on insignificant volume but it closed un­changed at €2.55 on Friday.

The bank’s interim statement last week said its financial performance from January 1 to May 11, 2012, was solid, with improved profitability in the life insurance business. The bank’s overall cost efficiency ratio is improving as growth in operating income outpaced expenditure.

After an absence of almost two weeks, Midi plc returned to trading with a 3% fall. This was the first time the equity was active after the company’s full year results for 2011 were approved on April 30, 2012. Pre-tax profit reached €3m, double the previous year; but the share price fall was probably investors’ reaction to the board’s decision not to declare a final dividend. But there was only one deal worth €68,000.

Malta International Airport plc (MIA) shares closed another week higher after closing 4% up in the previous week. Last week MIA gained 0.6% to end the week at €1.73. A final gross dividend of €0.107692 per share will paid on May 25.

International Hotel Investments plc was active on Friday the company said the performance of IHI-owned hotels in the first three months of 2012 had improved compared to the same period last year.

Investors swiftly reacted to the news as 60,000 shares were traded after an absence of 10 trading sessions. Notwithstanding this demand the equity remained unmoved at €0.82.

Likewise, Middlesea Insurance plc announced a first quarter given the partial recovery in foreign markets, which led the company to a further strengthen its solvency position, coupled with positive results from the group’s life and non-life portfolios. The news barely affected inves­tors as no trades were recorded after the announcement, while two deals of 2,000 shares were traded.

In the fixed interest market, Malta Government Stocks (MGS) prices closed up as equity markets once again failed to move higher. Safe haven flows saw yields on MGS falling further as nearly all issues posted higher prices, while a few short-dated issues closed lower.

In the corporate bond market price falls were more or less contained despite a 1% drop in the price of the 7% Midi plc Eur 2016 – 2018. On the upside the 4.8% BoV 2018 gained 1% to end the week at €103.5.

This article, which was compiled by Jesmond Mizzi, 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.