Global markets gain despite uncertainty

Global markets remained cautious but ended the week in positive territory amid the ongoing Euro­pean debt saga. Despite the G8 leaders agreeing that they were against a Greek exit from the euro­zone, this did not reduce uncertainty.

As a result, last week investors adopted a wait-and-see approach as they eagerly awaited the outcome of the EU summit. But the eurozone leaders remain divided over the introduction of eurobonds as Ger­man chancellor Angela Merkel op­poses joint bonds, while France and Italy support the idea.

As the week progressed, losses intensified in the euro area and EU finance ministers unofficially started making contingency plans for a possible Greek exit. Moreover,a German PMI manufacturing survey fell to three-year lows, further denting sentiment.

But on Friday the euro and Euro­pean stock markets initially took some respite after comments by Italian Prime Minister Mario Monti helped boost sentiment. He said Greece is likely to stay in the euro and Italy can persuade Germany to support the euro’s common good.

As a result, investors sent risky assets marginally higher as they expect the Greek problems to ease if real measures are taken to save the debt-burden economies. Further encouragement came from an unexpected rise in consumer confidence in Germany and France.

The Malta Stock Exchange gained 0.4% after a minimal fall the previous week. Initially the index struggled for direction, but on Thur­sday and Friday it gained momen­tum, following strong gains on Thursday by Bank of Val­letta plc and Go plc, despite weak volumes.

Trading activity was unusually spread across 14 equities, most of which took place towards the end of the week. Banking equities fell out of favour with investors last week, while Crimsonwing plc’s share price almost doubled after its com­pany announcement on Thursday.

After close of trading, the IT com­pany announced it has entered into a share purchase agreement to ac­quire the remaining issued share capital of Promentum Holdings BV. Crimsonwing already holds 51% of Promentum. Subject to shareholder appro­val Crimsonwing will take full ownership of the company.

The news was well received by local investors. The equity rose 88%, as 38,000 shares were traded. Last week’s gain puts the equity in positive territory on a year-to-date basis by 20% after Crimsonwing’s share price tumbled to a low of €0.16 in the first months of the year.

Fimbank plc was the only gainer in the banking sector as the equity rose 5% as five transactions of 61,000 shares were executed. Last week the equity was active for the first time following the bank’s interim direc­tors statement that the proposed transfer of shares from Massaleh Investments to Burgan Bank is at due diligence stage process.

Bank of Valletta plc only managed to close flat after trading at an intra-week low of €2.05. But after touching this low the equity closed the following session at €2.08. Nearly €0.6m was traded over 62 deals.

HSBC Bank Malta plc lost 0.4% on Friday on low volumes. The equity closed the first four sessions flat at €2.50 while on Friday it ended the session at €2.49. Trading volume rose to 69,000 shares, up from 21,000 shares traded the previous week.

Lombard Bank plc closed 3.4% lower on the week. A total of €23,500 was traded in two trading sessions. Since January,16% has been trimm­ed from the equity’s capitalisation.

Go plc shares’ positive rally continued with another 3.5% gain, to reach €0.88. The equity’s year-to-date performance now stands at -10%, compared to the -27% year-to-date drop on May 4.

In an interim directors’ statement, Go said revenue is strong across all main product lines and the com­pany expects the situation to remain the same for the rest of the year. The group plans to benefit from in­creased take-up of mobile data ser­vices and from TV services. It said profitability in the first quarter is marginally ahead of that in the first quarter of 2011.

Simonds Farsons Cisk plc’s shares rose 6.6% to €1.95 but just over 700 shares were traded. The company’s annual general meeting is expected to be held on June 20.

International Hotel Investments plc shares closed flat at €0.84 as turnover shrank to 5,885 shares, down from 275,000 shares traded in the previous week. Island Hotels Group plc also traded flat at €0.85 after two trades. This despite the group announing the previous week a franchise agreement with Costa International Ltd granting it exclu­sive development and opera­ting rights locally for Costa Coffee Shops.

Last week, MIDI plc gained 3% to close at €0.35 while insignificant trading in Plaza Centres plc resulted in a loss of nearly 3%.

Meanwhile, the share prices of Malta International Airport plc, RS2 Software plc and Santumas Shareholding plc remained stable on low volumes traded.

In the fixed-income markets, prices of Malta Government Stocks closed generally lower. The long-dated issues were the hardest hit with both the 2030 and 2031 issues losing 0.4%.

A total of €11.6m were traded in 77 transactions. While, in the cor­porate bond market, 27 issues were traded of which nine closed lower, ten gained and eight closed flat. The 6.2% Mizzi Organisation 2016 – 2019 lost nearly 2% while the 6.25% IHI 2015-2019 rose 1%.

Mediterranean Investment Hol­dings plc announced it will be meeting holders of the 7.15% MIH 2017 bond with the aim of conducting a change to the use of bond proceeds originally set out in the prospectus.

The company explained that in the political turmoil in Libya last year, it took out a €13.2m loan to make up for the lost business from Palm City to be able to meet its commitments during this period.

It added that it is still servicing the interest on this loan, which is proving more expensive than the idle cash from bond proceeds, which the company holds in low-yielding instruments. MIH is seeking bondholders’ approval to allow the company to use €8m out of the bond proceeds to finance part of the loan.

This repayment will reduce the interest cost the company is incurring. The meeting is expected to be held on June 11.

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.