Last week marked the end of the first quarter of 2011, and during the past three months the local market’s overall negative performance has been heavily influenced by the convergence of several factors. These included profit-taking, disappointing company results, geopolitical instabilities, and sudden global market corrections.
This led the Malta Stock Exchange to succumb to constant selling pressure, with the MSE index falling 8.4% during the past quarter, from its level at the end of last year.
A barrage of market-sensitive data have been released over the past three months, with both local and international companies and corporations releasing their annual results for 2010.
The markets were subsequently shaped depending on whether these results met or exceeded market expectations, or whether they disappointed investors.
Guidance for the rest of the year, though limited, also influenced markets’ directions. It is worth noting that the local market has significantly underperformed compared to most indices abroad, particularly those in developed markets, moving in directions that were very disconnected from world market trends in general.
The local corporate bond market was also very heavily influenced by geopolitical tensions in Libya which obviously affected directly or indirectly certain bond issues. This resulted in unusually heavy trading and sharp falls in a market which is usually very stable.
Once again this negative performance by some local bonds very much contrasts with the generally stable environment over the past quarter in most international bond markets.
The local Malta Government stock market has moved in tandem with benchmark safe government stock prices, particularly the German bunds (German government bonds).
Generally speaking, as equity markets abroad maintained their two-year upward bias, and risk aversion continued to moderate, preference for the safe-haven of certain government bonds continued to fall.
Furthermore, an indication of possible hikes in official interest rates by the European Central Bank led to a further downward bias in government stocks. Bond prices generally fall when interest rates increase.
Therefore, local government bonds prices fell slightly over the past three months, with occasional minor hiccups particularly during volatile circumstances in equity markets, such as the Japanese earthquake and the political instability in the Middle East and North Africa.
Last week, sellers predominated in trading on the local exchange, with the MSE index yet again sliding down to end the week 0.41% in the red.
The volume of trading last week was understandably lower given the public holiday on Thursday. A total of 168,501 shares exchanged in 129 deals, with trading was mainly concentrated on four equities.
Price movements were rather erratic last week, with only three out of 10 equities gaining some ground. Two equities ended the week unchanged, and the remaining five saw some significant selling.
Last week, buying interest reignited in the two major banks.
A total of 44,084 Bank of Valletta plc (BoV) shares were traded over four sessions, resulting in a slight improvement of 1.2% in the share price.
However, over the past quarter BoV’s share price has fallen by 9.6%, very probably due to profit-taking after a strong run-up in the fourth quarter of 2010 generated by the anticipation of the bank’s positive annual results.
However, the overall market’s generally negative sentiment might have also encouraged BoV shareholders to sell their shares.
Although nearly similar in scale, the 9.5% drop in the share price of HSBC Bank Malta plc over the past three months has erased a much larger proportion of the equity’s climb towards the end of last year. Last week, 55,150 HSBC shares were traded and the equity’s share price closed 0.3% higher.
Surely one of the hardest-hit equities this quarter was Go plc, whose share price fell drastically, shedding nearly 22% of its value and reaching multi-year lows of €1.50.
This negative performance can easily be attributed partly to Go’s negative year-on-year results. After last week trading the equity add a further 2.9% to its year-to-date losses.
Only a few local equities managed to end the first quarter in positive territory. Maltapost plc, Lombard Bank plc and Malta International Airport plc (MIA) defied the negative local vibe and managed to reach multi-month or yearly highs.
Anticipation and confirmation of successful annual results backed sharp positive moves in these three equities.
Maltapost climbed 10.1% over the past three months while Lombard and MIA improved by 7.1% and 6.6% respectively.
Last week some trading in MIA pushed its price further up to reach €1.77.
There was minor trading in Lombard and no trading in Maltapost.
The worst performers during the past three months (barring Go plc) were Global Capital plc, Loqus Holdings plc, and RS2 Software plc, which all suffered hefty losses close to, or surpassing 20%. However, these sharp falls were often the result of meagre and sporadic trading.
On Friday evening, International Hotel Investments plc announced that the group had registered a loss after tax of €13.1million for the year ended December 31, 2010, compared to a loss of €1.6m in 2009.
Regarding the present unrest in Libya, the directors said it is premature to provide estimates of the consequences of the events unfolding in Libya.
The directors added that despite the fact that business activities of the group is spread, these events will affect the company’s current year performance and may also adversely affect its future performance and financial position.
This article, which was compiled by Jesmond Mizzi, joint 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.