After weeks of decline, global equity markets gained three to four per cent last week, with some of the leading indices registering their best week this year.
Spain was once again in the limelight as investors awaited the outcome of a Spanish bond auction. Sales met their targets but it proved more costly than the previous bond issue. Early in the week the Spanish budget minister called for EU institutions to help the nation shore up its banking sector. Banks in Spain remain under pressure as the country struggles with growth and job creation.
Late on Friday the IMF issued the banking report on Spain, which urged authorities to act swiftly and to spare no effort to restore confidence. The report indicated that while larger banks could withstand an adverse scenario, others banks would need to increase their capital buffer by €40 billion. To make matters worse, on Thursday, rating agency Fitch cut Spain’s sovereign debt rating to BBB.
On Wednesday the ECB announced it had decided to retain interest rates unchanged. Having already reduced its benchmark interest rate 50 basis points to 1% and injecting over €1 trillion of short-term loans into the banking system, together with bond buying, the ECB seems reluctant to take further actions for the time being. Moreover ECB president Mario Draghi stressed the limitations of the bank’s current policies.
On Friday, following three days of gains, European markets fell slightly as investors booked their gains going into the weekend while economic data showed German exports were down in April.
Likewise in the US, exports fell for the first time in five months. Following the news US markets opened lower but as the session progressed equities gained as investors await outcomes of European finance officials to a possible Spanish bailout.
On Thursday, the Fedral Reserve announced that the US economy is at risk from Europe’s debt problems. Moreover, Fed chairman Ben Bernanke also sent signals to politicians that fiscal tightening might further hinder US growth.
The Malta Stock Exchange maintained the positive momentum. Over the past three weeks the MSE index has gained 2.5% and it is up 4% from this year’s low in April. On a year-to-date basis the index is still down 1.6% at 3,045.103 points.
Activity on the local stock market fell last week during which there were only four sessions due to the public holiday on Thursday.
Trading volume was weak in nearly all equities bar a few while, all of which closed in positive territory. Of the nine equities traded during the week the gains in three equities, headed by Go plc, were enough to outweigh the losses in another four equities, three of which were financials, while Bank of Valletta plc (BoV) and International Hotel Investments plc (IHI) closed the week flat.
Go plc, the most traded by volume last week, gained 5.4% or €0.05 to close last week’s final session at €0.97 as 140,000 shares changed hands in 23 deals worth €132,000, up from €39,000 the previous week. Investors’ demand for the equity has soared by almost 39% since May 14, when the equity’s price reached a low of €0.70. Significant turnover has backed this hefty gain throughout the past four weeks as trading value reached €0.86m since mid-May.
In the banking sector, HSBC Bank Malta plc shares moved against the trend in other financial equities. The equity gained 1.6% or €0.04 to close the week at €2.52; however, volume was weak and below that of the previous week. A total of 13 deals worth €98,000 were executed.
Last week the company announced that 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.
In the week’s opening sessions Bank of Valletta plc’s share price initially rose but trading volume was weak. On Friday it surged to 91,000 shares as the equity lost 1% to end the week flat at €2.06.
Lombard Bank plc’s share price fell 0.4% to €2.25 on insignificant volume. Similarly, Fimbank plc shares fell 1.2% to close the week at $0.84 after one deal of 900 shares. The bank’s equity is still 9% up since January. Likewise, lack of demand for Middlesea Insurance plc shares pushed its equities’ price 0.8% down. Just over 2,000 shares were traded in three deals.
IHI shares traded flat at €0.90 after gaining 7% a week earlier. Last week turnover in IHI fell to €11,000, from €68,000, as 12,600 shares were traded.
Malta International Airport plc (MIA) shares rose 0.6% to €1.74following May’s improved traffic results announced early in the week.
In the IT sector RS2 Software plc was the only active equity. Last week its share price shed 2% to end the week at €0.50.
In the fixed-income market, turnover in corporate bonds totalled €1.33 million spread over 20 issues, of which 11 recorded price changes.
The 6.8% Premier Capital 2017-2020 headed the list of gainers with 0.8% rise while the 7.15% MIH 2015-2017 lost 3.5% as the issue’s price closed the week at €97.
In government bond market, yields closed the week higher after prices retreated slightly following gains in the previous weeks. As equity markets abroad regained ground the Central Bank revised bond prices lower to reflect the higher yield on German bunds. The long-dated 5.25% MGS 2030 and the 5.2% MGS 2031 lost 0.7% while losses across short and medium-dated issues where more contained.
As anticipated, last week the Treasury announced that the government will be issuing three new fixed-rate bonds. The coupon rates and maturity dates are 3.75% MGS 2017, 4.3% MGS 2022 and a long-dated 5.1% MGS 2029. Prices for these new issues will be announced on Thursday and applications will be accepted as of June 18.
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.