Over the past week, nearly all equity indices headed upwards, reversing the slight correction of the previous weeks. Volatility in asset prices in particular seem to be moderating, given a certain tangible optimism and an overall calming of fears that were omnipresent in the previous month.
European stocks rallied as investors priced in an improvement in the economic outlook- Jesmond Mizzi
European stocks rallied as investors priced in an improvement in the economic outlook and looked forward to a European Central Bank loan to banks. German data and better than expected US housing and employment data also encouraged investors to regain some confidence. Such gains, however, were achieved on low volumes, typical during the holiday season.
Locally, the Malta Stock Exchange index appreciated by a meager 0.48%. This, however, camouflages some sharp intra-week price movements in certain equities. Total volume was on the high side, particularly given the unusually active trading in Maltapost plc shares. The index closed the week at 3,074.879 points, or 18.7% lower than the level at the end of December 2010.
Bank of Valletta plc ended the week unchanged after moderate trading that saw with minor intra-week movements, while Fimbank plc improved by 0.13% after sharp fluctuations. On the other hand, hefty trading led Maltapost plc’s share price to soar by 4.2% to end the week at €0.995.
Middlesea Insurance plc and Midi plc which fell sharply by 11% and 10% respectively, both on minor volume, while both HSBC Bank Malta plc and Malta International Airport plc closed the week in positive territory after having appreciated by 3% and 5% respectively.
Equity indices worldwide have moved somewhat in tandem this year, going through similar peaks and troughs. However, understandably, European indices clearly underperformed compared to US indices, which ultimately might even end the current tumultuous year in positive territory.
The local market fared similar to most European equity indices, shedding nearly 19% since the start of the year. The manner in which the local equity market moved was, however, somewhat erratic when compared to European and global indices.
The local index rarely mimicked movements in global asset markets, probably due to the limited number of tradable equities and the varied economic impacts on each equity having its own specific characteristic.
Furthermore, trading volumes have been haphazard on the local exchange, with most of the low capitalised equities seeing irregular and limited trading throughout the year. Pricing of these rarely-traded equities could therefore easily be out-of-sync with general local or global economic factors.
Some equities with low market capitalisation seem to be ending the current year sharply in the red, significantly underperforming compared to the already negative overall MSE index.
Both Crimsonwing plc and 6PM Holdings plc succumbed to selling pressure, plunging by nearly 35% and 40% respectively. Similarly, Global Capital plc shed a third of its value since the start of the year, yet during the summer months the losses had escalated to well over two-thirds of its 2010 closing value.
These companies were affected by company-specific news, often badly hit by the worsening of European and global economy in general.
On the other hand, some other small companies outperformed the local market, a few of which actually heading into positive territory on a year-to-date basis.
Clearly, RS2 Software plc outshines all local equities, with its 23% improvement since the start of the year, notwithstanding the initial uncertainties. Positive outlook and performance helped this equity to defy the overall local bearish vibe.
Somewhat similarly, both Plaza Centres plc and Simonds Farsons Cisk plc are up for the year, although much more moderately than RS2. Nevertheless, these modest gains represent strong outperformance when compared to the overall market.
However, trading volumes in both these stock was typically low and uneven throughout the year.
Similarly, Grand Harbour Marina plc and Lombard Bank plc have outshone the MSE index considerably, yet are both still in slightly negative territory.
Last week, local corporate bond price movements were fairly subdued, but the 5.6% Global Capital plc bond maturing between 2014 and 2016 edged 1.25% lower to close at €79. Conversely, the GBP and euro denominated 7% Fimbank bonds both improved by 2%.
Activity in the Malta Government Stock market last week was moderately low except for an intra-week €20 million deal in the 4.3% MGS 2016. MGS prices remained generally unchanged with minimal volatility during the week.
I wish all readers a Happy Christmas.
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 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.