Last week the global sell-off of equities continued as investors adopted a cautious approach amid mounting concerns over a number of periphery countries in Europe.
Greece announced fresh elections will be held on June 17, as political parties remain divided over the future of the debt-burden economy. Investors fled equities, hedging themselves against the eventuality of Greece leaving the eurozone.
Some analysts indicated that if Greece were to exit the euro, the debt problem might worsen the situation of other debt-ridden countries, which might have lasting implications on the sustainability of the trading block. Greek bank depositors withdrew nearly one-trillion dollars worth of funds, further weakening the already ailing system.
Rating agency Moody’s downgraded the debt of 16 Spanish banks. The credit rating of Banco Santander SA, one of Spain’s two biggest lenders, was cut three levels. This added further woes to global markets as investors’ outlook of the global economy took another knock.
Capital flight continued as investors sold the risky euro in exchange of the more popular US Dollar, which continued to gain ground as demand for safe assets surged. Yields on German bunds declined to record lows while the yield-spread on other European debt widened.
Gains recorded by the US Dollar last week were more or less based on safe-haven flows rather than on fundamentals. Economic data released in the US was disappointing. Jobless claim figures rose, while other leading economic indicators moved into negative territory.
Meanwhile in the UK, growth was revised lower as projected inflation fell to 1.6%, giving room for more quantitative easing.
Equities listed on the Malta Stock Exchange continued to trade on local developments rather than on events in other peripheral EU countries, although the price declines in the share prices of the two major banks might reflect investors’ concern about their potential exposure to troubled EU nations. But in an interview on local television last Friday the chief executive officers of both Bank of Valletta plc and HSBC Bank Malta plc were upbeat about the results their respect banks are achieving despite the global challenges they are facing.
Last week the MSE index shed 0.2% following three consecutive weeks of gains. This is a far cry from the fall of global indices of between two to five percentage points.
Financial equities were the only contributors to last week’s decline on the MSE. Middlesea Insurance plc shares were the hardest hit while Go plc made a whopping 15% gain.
Go plc shares closed €0.09 higher to end the week at €0.85 after just under 0.9 million shares were traded in 34 deals. Investors’ outlook improved after a company announcement in the second week of May, in which the telecoms firm announced that the transfer of 11 properties from the government to the company was approved. The equity kicked off the week flat, gained gradually as the week unfolded, and surged up on Friday.
International Hotel Investments plc also closed higher at €0.84 after having failed to break the €0.82 level last week. Turnover in the hotels operator improved significantly as 275,000 shares were traded.
Meanwhile, a thin trade in Island Hotels Group plc left the equity’s price intact at €0.85. Last week the company announced that through its wholly owned subsidiary The Coffee Company (Malta) Ltd, Buttigieg Holdings Ltd had signed a franchise agreement with Costa International Ltd granting it the exclusive development and operating rights for Costa Coffee Shops in Malta. The company plans to convert three existing outlets at Malta International Airport into branded Costa coffee shops this year. Further outlets are expected to follow in key locations on the island.
Last week banking equities took a nosedive despite positive interim results announced by HSBC Bank Malta plc the previous week. Out of the three active banks, HSBC was the hardest hit, losing 2% or €0.05 to end the week at €2.50. However, trading volume was weak as only 21,000 shares were traded.
Bank of Valletta plc followed its largest peer with a 1.9% drop. In the first four trading sessions BoV traded between a weekly low of €2.10 and a high of €2.12, while in the final 20 minutes of Friday’s session the equity succumbed to even more selling pressure as it traded at a low of €2.08. Over 106,000 BoV shares changed hands across 49 deals.
Lombard Bank plc shares managed to close down by just 1%, after having traded at a weekly low of €2.30 earlier in the week. But two thin trades in the final minutes on Friday lifted the equity to €2.349.
After trading closed on Friday, the bank issued an interim directors’ statement maintaining that the bank’s liquidity and capital adequacy ratios are well above regulatory requirements. It added that the bank holds no exposure whatsoever to financial instruments of non-Maltese sovereign or corporate entities.
Fimbank plc announced through an interim directors’ statement that the proposed transfer of shares from Massaleh Investments to Burgan Bank is at due diligence stage process by Burgan on Fimbank.
Erratic trading in Middlesea Insurance plc left investors with a weekly loss of almost 6% or €0.04 as the equity closed at €0.65. Three deals of 5,500 shares were executed.
Malta International Airport plc shares closed the week up 1.2% at €1.75 on declining volumes. On Friday the company announced that during the first months of the year, the company’s financial position and performance has been in line with projected results. It added that the number of passengers expected to use the airport during 2012 will be between 2 to 3% less than last year.
In the fixed-income market Malta Government Stocks closed generally lower, hence higher yields. Sixteen issues were active as €13.7m were traded across 79 deals. In the corporate bonds market, 19 issues were traded across 66 deals worth €1.6m. The 4.25% BoV 2019 rose 0.7% while the 6.25% IHI 2015-2019 shed almost 3%.
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.