Foreign equity markets experienced an interesting week as investors grew bearish as the week unfolded but risk appetite returned on Friday, despite the lack of conviction among investors after the European Central Bank’s monetary policy announcement on Thursday.
A week earlier on July 27, markets soared following comments by the ECB president Mario Draghi, who pledged that the central bank would do whatever it takes to hold on to the euro. Last week markets kicked off on a high as investors were anticipating some form of easing to support the weakening economies.
However, following the lack of action taken by the US Federal Reserve on Wednesday, safe haven flows were witnessed. Equities around the globe fell and the US Dollar gained against the riskier euro, as investors anticipated where the markets would head if the ECB did not offer concrete measures to boost confidence.
But Draghi did not deliver what investors were expecting – a restart of the bond-buying programme. He did not dismiss this move entirely, but if there is a new round of bond-buying, this time round it might come with conditions attached.
The news sent the euro sharply lower on Thursday and early on Friday; however the mood swiftly changed after the much-awaited US jobs data was announced. Payrolls climbed more than forecast in July to the highest level since May.
Late on Friday afternoon Spain responded to an ECB offer of intervention and signalled it would consider seeking a sovereign bailout. As a result, major European and US indices rallied and closed higher for the second consecutive week.
After four weeks of gains the Malta Stock Exchange’s positive run came to an end with the local stock market losing 1.3%, the sharpest fall the past four-and-a-half months. Eight equities closed in the red, pushing the MSE index below the 3,100 level at 3,086.70 points. Moreover the index’s year-to-date performance turned negative by 0.3 per cent.
Last week also marked the end of July, during which the MSE experienced the best monthly performance this year. In fact, the local stock market gained 2.7% in July as HSBC Bank Malta plc shares gained 14%, or €0.36, as investors jumped in to acquire the equity ahead of the bank’s interim results.
But last week, the upbeat mood surrounding HSBC a week earlier failed to lift sentiment and investors were reluctant to bid the bank’s share price higher. In fact, the MSE index only rose on Friday after having closed lower in the first four trading sessions.
A total of €0.7 million was traded in 12 equities. Trading volume was unequally spread and more share prices fell on thin trading. This clearly demonstrates liquidity risk, where lack of demand forces sellers to accept lower bids which in turn erode these equities’ capitalisation.
After a slight rise on Monday, HBSC shares failed to sustain the momentum and closed the week 0.5% down at €2.88 after touching a high of €2.90. Despite announcing positive interim results and a gross dividend of €0.10 per share, demand for HSBC shares was minimal and the share price failed to break through the €2.90 level. Last Friday the equity traded for the last time with the entitlement to dividend which will be paid on August 22.
Bank of Valletta plc (BoV) gained for the second week running, ending 0.5% up on the week at €2.11. The equity closed the opening three sessions lower, touching a low of €2.05, but on Thursday the share price jumped by 2.4% to €2.10 on thin trading while it gained further ground on Friday. Turnover fell to €110,000 as 53,000 shares were traded in 41 deals.
Fimbank plc shares lost 2.4%, or $0.02, as the equity ended the week at $0.83. A total of 80,000 shares were traded, up from 7,200 shares a week earlier. The board of directors is due to meet on August 28 to consider and approve the consolidated financial statements for the six months ended June 30, and to consider the payment of an interim dividend.
Middlesea Insurance plc closed minimally lower at €0.62 as three deals of 6,750 shares were executed.
A 6% fall in International Hotel Investments plc’s share price was a huge drag on the MSE’s performance given its weighting on the exchange. The equity closed the week at €0.80, down from €0.85 a week earlier. Trading volume rose to 20,500 shares, but was not representative of the broader market. So far this year over 5% of this equity’s capitalisation has been shaved off.
Go plc shares closed another week lower by 1%, which compares favourable to the previous week’s 3% drop. Last week €12,000 was traded in four transactions.
Lack of trading in Plaza Centres plc forced sellers to accept lower bids and the price tumbled 5% when compared to the last closing price in mid-July. The share price succumbed to selling pressure early in the week as one deal of 4,000 shares reduced the price to €0.55, which it maintained for the remaining sessions.
Malta International Airport plc (MIA) shares also closed in negative territory after the equity shed 1.8% or €0.031 to end the week at €1.739. The equity was active in three trading sessions and its trading volume soared to 145,600 shares, up from 40,000 shares a week earlier. Year-to-date MIA shares are up 3%.
In the IT sector, 6PM Holdings plc headed the list of gainers with a 14.3%, or £0.04, rise as the equity closed the week at £0.32. RS Software plc’s share price gained a strong 4.2% to end the week at €0.50 on high traded volume, while Crimsonwing plc lost 19%, or €0.05, to end at €0.21.
Meanwhile, Simonds Farsons Cisk plc was the only equity that closed flat as two deals of 3,300 shares were executed at €2.
In the government bond market, yields were again generally lower, reflecting the lack of confidence and volatility currently surrounding equity markets abroad. The five-year 4.25% MGS 2017 gained 60 basis points to close the week at €106.11 while the long-dated 5.25% MGS 2030 gained 0.57%. The recent 5.1% MGS 2029 issue closed flat at €103.
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 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.