Global equities remain positive

As speculation about the Greek election continues and despite the planned aid to Spanish banks, markets abroad had a moderately positive week, despite developments that would normally have sent markets lower. But markets reacted differently as some investors believe equity markets had already priced in a great deal of event risk in April and May.

Initially positive sentiment was triggered by rumours that the European Central Bank was intervening again in the European government bonds’ market as yields on Spanish and Italian bonds reached bailout levels. Moreover Spain’s sovereign debt rating was downgraded on Tuesday while a weak Italian bond auction did not help calm bond markets. Following this auction, the borrowing cost for these two countries increased further.

Despite increasing debt problems, investors preferred to focus on the leaked rumours that the European Central Bank will be stepping in to inject liquidity in bond markets.

Moreover, late in the week, central bankers said more coordinated measures can be taken if disruptions to financial markets intensify. The outcome of today’s new elections in Greece will impact risk appetite and the eurozone’s future.

In the currency market the euro gained some lost ground against the US Dollar. For the time being the safer Dollar might find little upwards momentum given next week’s meeting of the US Federal Reserve. Weak US retail sales data and soft inflation figures increased the chances of more quantitative easing. If this happens the Dollar might struggle to hold on to its recent gains against the euro.

The Malta Stock Exchange’s recent rally continued as the index closed 0.5% higher at 3,058.95 points. This was the fourth straight week-on-week gain, the longest winning streak this year. Yet momentum seems to be losing some steam as gains were made at a diminishing pace. The MSE closed lower in two sessions but higher in the other three. Go plc shares gained a whopping 19%, while investor sentiment over financials remains indifferent.

The week’s trading volume im­proved significantly as 1.2 million shares worth €1.1m were traded in 143 deals. Bank of Valletta plc (BoV) was the most liquid equity and Go and Midi plc followed suite.

In the banking sector, Fimbank plc shares gained 1.2% to close at $0.85. Trading volume increased sharply to 152,000 shares traded in two deals. The bank’s capitalisation has risen by just over 10% so far this year.

BoV shares gained 0.5% following a flat close the previous week. The bank’s share price ended the week at €2.07 after trading at a high of €2.09. A total of €0.4m was traded in BoV in 44 transactions.

Last week, trading in HSBC Bank Malta plc was erratic and uneventful. The equity was active on three trading days but closed each day unchanged at €2.52 despite trading at a weekly low of €2.48. Trading volume remained low as 31,000 shares changed hands in 15 deals.

Meanwhile, Lombard Bank plc fell 2.2% or €0.05 to end the week at €2.20. The bank remains susceptible to liquidity as it continues to lose ground on insignificant volume. Last week one deal of a mere 1,200 shares was executed. Since January the equity’s share price has fallen 18.5% or €0.50.

Similarly, Middlesea Insurance plc closed 2.3% lower at €0.63 as the equity succumbed to selling pressure as demand dried up.

Local investors remain upbeat about Go plc. Last week the equity posted a sharp 18.6% or €0.18 rise to end the week at €1.15. Moreover, this gain was supported by ever-improving volume as 172,000 Go shares were traded, up from 140,000 shares a week earlier. Last week’s gain takes the equity 17.4% to positive territory on a year-to-date basis, after spending the past six and a half months in the red.

Malta International Airport plc (MIA) last week gained 1.7% or €0.03 on improving volumes following the previous week’s 0.6% gain. Earlier in the month the airport operator company issued its traffic results for May. Passenger movements grew 5.8% to just over 344,000 passengers, the highest ever for the month of May.

Following an absence of two weeks Simonds Farsons Cisk plc gained 0.3% to reach €2. Nearly 25,000 shares were traded in seven transactions. Meanwhile Plaza Centres plc’s share price lost 23% to close at €0.69 on insignificant volume as 500 shares were traded.

Midi plc shares lost 4.3% in final trading session to end the week at €0.335. A total of 500,000 shares changed ownership. Meanwhile, in the IT sector Crimsonwing plc’s share price lost 6.7% to close at €0.28 after having traded at a weekly low of €0.20. An uneventful week in RS2 Software plc left the equity’s price intact at €0.50.

In the fixed-income market, the prices of all active government bonds fell as markets abroad remained in recovery mode. As risk aversion fell, demand for riskier assets improved, sending equity prices higher. In turn, safer German bunds lost some of their recent shine and as a result yields improved.

In Malta, local government bond prices were revised down. Last Thursday the Treasury announced the prices for the new Malta Government Stocks for the three issues it will be offering from tomorrow. The 3.75% MGS 2017 will be offered at €102, hence a yield to maturity of 3.324%; the medium-dated 4.3% MGS 2022 will be offered at €100.25 with a yield of 4.268% while the long-dated 5.1% MGS 2029 will be offered at €101 giving a yield of 5.012%.

Turnover in corporate bonds reached €1.2m. The 7.15% Melita Capital 2014-2016 was the most active issue.

Mediterranean Investment Hol­dings plc announced that at last Monday’s general meeting of holders of the 7.15% MIH 2017 bonds denominated in euro, Sterling and US Dollar, the resolution submitted at the meeting was approved by the bondholders present in person or by proxy.

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.