Global markets tumbled last week while the euro fell to new lows against the safer US dollar. The European Central Bank sent bond markets into a panic on Thursday, after it warned it would not step in to fill any void left by eurozone politicians who would not take decisive actions to contain the debt crisis.
Throughout the week, risk appetite remained at bay as fears over the strength of Spanish banks intensified. The selling of the single currency became more severe as the borrowing costs for Spain continued to rise. Yields on debt issued by Spain and other peripheral nations also continued rising as investors shun bonds issued by indebted countries and flock to German bunds.
But late on Friday, borrowing costs for Spain and Italy took some respite after talks suggested the ECB might return to the bond market to buy bonds of these countries. On Friday, for the first time ever, Germany’s two-year debt traded at negative yields as investors pushed bond prices higher as demand gained momentum.
In the US, prior to markets opening on Friday, dismal employment figures were released, which added further concern about the strength of the US economy. The news helped the euro ease some of its recent declines.
Further data suggests that manufacturing output shrank in Europe and slowed in China while the US grew at a slower pace. Going forward, equity markets are expected to remain volatile while safe heaven flows will most probably remain at least until investors have a less cloudy picture of what the future holds for the euro and Europe.
Locally, the Malta Stock Exchange closed higher for the second week running with a 1.4% gain, the highest week-on-week gain since mid-November last year. Last week, the local index surpassed the 3,000 points level after trading below this level for over two months.
Despite a negative opening on Monday, gains in next three trading sessions was enough to push the local equity market higher. Gains in a number of non-financial equities outweighed the losses in the banking sector, which remains under selling pressure.
Earlier in the week the European Commission said it is concerned by the local banks’ exposure to the Maltese property market.
The Commission urged the government to take measures to ensure the banks’ robustness, which are vulnerable to deterioration in the quality of their loan portfolio.
Go plc shares’ positive rally continued as the equity added 4.6% to close at €0.92. Since closing at a low of €0.712 in first week of May, Go has posted a hefty 29% gain, while the equity’s year-to-date loss has been reduced to -6%. Over 44,400 Go shares were traded last week, down from 67,000 the previous week.
International Hotel Investments plc shares also closed the week on a high with a 7% or €0.06 gain and on improving volumes. Trading value reached €68,000, up from a mere €5,000 a week earlier, as 20 deals were executed. Throughout the week the equity’s price fluctuated between a low of €0.84 and a high of €0.90, the week’s closing price.
Meanwhile, one thin trade in Island Hotels Group plc left the equity’s price intact at €0.85. Since January, all shares in this equity have traded at €0.85. On Tuesday, the company announced that the board of directors is due to meet on June 25 to discuss the half-yearly financial statements ending April 30.
Medserv plc shares also closed flat at €3.95 despite a slight drop in the share price on Monday. Nearly €18,000 worth of shares changed hands in two deals.
In the banking sector, Fimbank plc was the only equity not to close in negative territory. The bank ended the week unchanged at $0.85 after touching an intra-week low of $0.75 on Monday. Thereafter it surged by 13% to climb back up to $0.85.
After closing flat the previous week, Bank of Valletta plc closed the final session 1% lower at €2.06 on increased turnover. Recent comments on the banks’ exposure to the local property market did not help lift investors’ sentiment.
HSBC Bank Malta plc was not immune to such comments. A total of €168,000 were traded as the bank’s share price which closed theweek down 0.4% at €2.48. HSBC announced it had obtained regulatory approval to sell its card acquiring business to HSBC Merchant Services Ltd, a Maltese subsidiary of Global Payments Inc, and had thus concluded the sale. Last December the bank had said this transaction would carry a consideration of €11.075 million, while HSBC’s card-acquiring staff will become employees of HSBC Merchant Services Ltd.
On Friday the bank announced the board of directors is due to meet on August 7 to approve the group’s and the bank’s interim accounts for the half-year ending June 30, and to consider the declaration of an interim dividend.
Lombard Bank plc followed its larger peers with a 0.4% drop. Trading value was €22,000 over five deals, similar to the previous week.
Last week, Plaza Centres plc’s share price shot up 59% on one deal of 800 shares. Following a share split of three shares for every one held, which was approved at the company’s annual general meeting held on May 24, the share price adjusted to €0.567, while it rose rapidly moved to €0.90.
Simonds Farsons Cisk plc also rose 2.3% or €0.045 higher as one deal of 1,200 shares was executed.
On a sharp increase in activity, Maltapost plc shares fell 4.2% or €0.04 to end the week at €0.92. There was over €85,000 worth of trading in two sessions. Malta International Airport plc shares shed just over 1% to to end at €1.73, while RS2 Software plc lost 2% to end the week at €0.51. Grand Harbour Marina plc’s share price fell 1% to €1.849 after a single deal.
In the fixed-income markets, Government bond prices were generally revised higher by the Central Bank, given the lower yields in German bunds. The long-dated 5.25% MGS 2030 gained 6 basis points to close at €103.33. A total of €25m was traded in this market while trading in corporate bonds totaled €1.34m.
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.