While local equities continued to underperform major global indices, the latter maintained the positive stance that they started at the beginning of the year. This notwithstanding some recently voiced concern on the duration of the rally in financial markets. But investors reacted positively to last week’s events, particularly the upbeat German and US economic data. The optimistic outlook expressed by US Federal Reserve on the US recovery also helped the US Dollar to gain further ground against the single currency.
In the US the Standard and Poor’s 500 index registered a fifth week of gains, improving by a further 2.4% and thus up nearly 12% year-to-date. Meanwhile, the Dow Jones Industrial Average reached its highest level since December 2007. Likewise European shares continued to advance and last week registered strong gains, with the Xetra Dax index in Frankfurt adding another 4% and thus surpassing 20% of gains so far this year.
The Malta Stock Exchange (MSE) index recorded a sharp 1.5% fall to close the week at 2,960.079 points after having hovered around the 3,000-point level since the second week of February. Two highly capitalised equities were the main contributors for last week’s decline.
Gains by Bank of Valletta plc (BoV) and Fimbank plc had little effect on the broad market as investors battered Go plc, while HSBC Bank Malta plc (HSBC) and International Hotel Investments plc (IHI) closed in the red.
Company announcements by listed equities are a main driver of price movements on the local exchange and this trend was evident once again. In Friday’s session, minutes after Go plc announced its annual results for the year ended December 31, 2011, the equity plunged to €0.765 and ended the session at an all-time low of €0.76.
Go announced a pre-tax loss of €45.2 million, as it accounted for losses attributable to an investment in a jointly-controlled entity of €62m. Furthermore, for the first time since Go went public, the board of directors are not recommending the payment of a dividend. The company said the results represent the combination of a steady performance of the local operations, which continue to deliver a healthy level of operating profit, and the material negative impact of international economic events on the company’s investment in Forgendo Ltd.
Go added that local operations resulted in an operating profit of €18.4m, down by €4.4m compared to 2010. But if the one-time charges relating to pension obligations and voluntary retirement schemes were excluded, locally the company achieved growth of 2.2%. Last week the equity lost or €0.078, or 9.3 %, as nearly 31,000 shares changed hands across seven deals.
On similar trading volumes, IHI shares shed a further €0.03 or 4%, as the equity returned to the €0.75 level. Activity in IHI was unevenly spread, with the largest chunk of shares being traded on Friday. The fall may have been a reaction to the announcement by another hotels operator, Island Hotels Group plc (IHG). The latter voiced concern on the economic climate in the company’s core markets and competition from other destinations is expected to intensify. Trading in IHG last took place on February 28.
On the positive side, Fimbank plc outperformed the broad market, especially its counterparts in the financial sector. The bank jumped by 13% on the week to close at $0.85 after having reached a weekly high of $0.95.
On Tuesday before the local equity market opened, the bank announced the annual results for the year ended December 31, 2011, reporting a $9.13m, or 35% increase in profitability over 2010. At the forthcoming annual general meeting the board of directors will be recommending the payment of a scrip dividend of 2.003884 US Dollar cents per share and a bonus share issue of one share for every 25 already held.
Fimbank also announced that its largest shareholder, Massaleh Investments KSCC has granted Burgan Bank SAK the right to acquire its holding in the bank. On its part, Burgan has informed the bank’s board of directors of its intention to inject new equity in the bank that will see it increase its prospective holding to above 50% of the bank’s issued share capital. Following this announcement the equity closed with a 20% gain on Wednesday on massive volumes, but retracted some of these gains on Thursday.
Meanwhile, despite an uneventful week, BoV shares recorded a mere 0.5% gain to end the week at €2.16 after 18 deals of 26,523 shares were executed. The equity’s price barely changed throughout the week.
Conversely, HSBC’s share price fluctuated significantly between a weekly high of €2.63 and a low of €2.55. Trading volume on the week doubled with nearly 143,000 HSBC shares being dealt across 17 transactions.
As from last Wednesday the bank started trading ex-div, hence on Tuesday investors flocked in to secure entitlement to the bank’s next dividend payment. As a result this was the busiest day for the equity, while activity remained more or less in the same territory thereafter.
Among the equities which traded in low volumes was Lombard Bank plc, which closed down 0.4% at €2.52, while two deals of 900 Middlesea Insurance plc shares pushed its share price price down to €0.69.
Maltapost plc closed the week flat at €0.91 after some insignificant price movements while Malta International Airport plc and Plaza Centres plc closed at €1.679 and €1.80 respectively.
In the fixed-income market, government bond prices once again closed generally lower following higher equity markets abroad. Local government bond prices mimic price movements in German government bunds which tend to be inversely related to equity markets. Over €10.2m were traded last week.
In the corporate bonds market over €0.9m worth of trading took place over 80 deals. Last week BoV said it will be issuing a new medium-term note carrying a coupon of 4.25% and maturing in 2019. The new bond issue will be offered at a price of €100 and applications will be available as from Tuesday.
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.