Although volatility remained and political division in Europe heightened initially global markets closed the last trading session of June on a high. Markets adopted a wait-and-see approach as they awaited the outcome of the two-day EU summit. Until close of business on Thursday risky assets and the euro found little support as a handful of developments out of Europe unfolded.
Cyprus became the fifth casualty of the debt crisis which has been haunting Europe and the global economy for the past three years now. Rating agency Fitch downgraded Cyprus’ sovereign debt rating. Moreover last Monday, 28 Spanish banks were downgraded.
Ahead of the EU summit, investor sentiment took another knock as German Chancellor Angela Merkel hinted she would retain her view against the introduction of euro bonds. As a result, yields on Spanish and Italian debt widened when compared to the safer German bunds while the US dollar benefitted from safe haven flows.
But after 13½ hours of talks in Brussels, Luxembourg’s Prime Minister Jean-Claude Juncker assured markets that an array of possible interventions and measures are available to help Spain and Italy.
Following this news, risk aversion fell, the euro gained, yields on risky peripheral debt plunged, and equities surged around the globe.
On Friday, European indices gained, with the German Dax ending the session up by 4.3% while the FTSE 100 in London gained 1.4%. On a month-on-month basis, European markets closed higher following a pullback in May, while on a quarterly basis the major indices closed lower after the positive sentiment earlier in the year faded.
In the US, consumer confidence fell for the fourth month in a row but better than expected data was released thereafter. House prices declines moderated while durable goods’ prices rose far more than expected. Throughout the week US equity markets moved more or less in line with European indices while on Friday US markets rallied after a European agreement lessened concerns that banks would fail.
The Malta Stock Exchange closed lower for the second week running with a 1% fall to end the week at 3,022.168 points, the lowest level in June. The local stock market was active for four days due to Friday’s public holiday; the market closed up on two days but losses in the first and last sessions were enough to send the MSE index in negative territory.
Last Thursday also marked the last trading session of June and the second quarter. On a monthly basis the stock market lost 0.2%, despite a positive three-week rally early in the month. But on a three-month span the MSE index gained almost 3%, up from a 5% fall in the first quarter.
Last week lack of liquidity in active equities proved to be a curse on their performance. Some listed equities’ market capitalisation was significantly reduced on low volumes as 200,000 shares were traded in 63 deals worth €0.28m. Investors remain divided over financials as two closed lower, two gained, while Lombard Bank plc ended the week flat at €2.20 after a deal of 500 shares.
Middlesea Insurance plc gained 1.6% to end the week at €0.64 as turnover increased to just over €8,000 as nine deals of nearly 13,000 shares were executed.
HSBC Bank Malta plc rose but trading volume remained weak and unreflective of the general market sentiment. The equity posted a 0.4% gain, closing Thursday’s session at €2.51 after trading at a high of €2.52 and a low of €2.481. HSBC is down nearly 3% year-to-date.
On Thursday after close of business, the bank announced that its board of directors will meet on July 27 to approve the group’s and the bank’s interim accounts for the half-year ended June 30, and to consider declaring an interim dividend.
Bank of Valletta plc (BoV) shares fell for a second consecutive week as it ended the final trading session at €2.06, down 0.4%. A total of 44,000 BoV shares were traded unevenly spread in three sessions. The share price hovered between a low of €2.05 and a high of €2.08. In June, BoV shares lost 1% while on a quarterly basis the equity is down 3%.
Global Capital plc lost almost 12% after one trade of 400 shares. The equity, which has been inactive for four months, traded on Monday when one transaction sent the equity’s price down to €0.83, from its previous close of €0.94 in February.
After seven straight weeks of gains, the rally in Go plc shares came to an end last week. Go shares fell 0.4%, ending the week at €1.175 after touching an intra-week low of €1.15. But turnover was nowhere near that of recent weeks. Last week just under €3,000 were traded, down from €158,000 a week earlier.
Simonds Farsons Cisk plc shares gained 7.5% or €0.05, to close at €2.15. Since January SFC has gained 19%. Turnover was more or less in the previous week as over €45,000 was traded in two transactions.
International Hotel Investments plc’s negative performance dragged down the MSE index’s performance due to its high market capitalisation. Last week the equity’s share price dropped back to €0.85, a price level last seen in the end of May. In June the share price fell 5.6% while on a year-to-date basis the hotels operator is up by just under 1%.
Malta International Airport plc closed flat at €1.78 as three deals worth €21,000 were traded.
In the IT sector, RS2 Software plc also ended the week unchanged at €0.50; Meanwhile 6PM Holdings plc lost 8.6% or £0.03 after one deal of 1,000 shares, and another deal in Crimsonwing plc on Thursday sent the equity’s price 7% lower to €0.26. On a month-for-month basis all listed IT firms closed lower.
In the government bond market, yields generally improved as the Central Bank revised bond prices lower as foreign markets recovered. The long-dated 5.25% MGS 2030 lost 44 basis points and is now yielding just over 5%, while the 10-year bond closed flat at €100.30.
Last week a total of €23m were dealt in this market.
In the corporate bonds market two Mediterranean Investments Holdings plc (MIH) bonds topped the gainers list. The 7.5% MIH 2015 gained 2% while the 5.6% Global Capital plc 2014 – 2016 lost 1.2%.
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.