When do you grasp a falling knife?
"If you want to be a successful investor, it is very simple. It is easier said than done, but you've got to be fearful when all the other guys are getting greedy. And you've got to get greedy when everybody else is getting fearful."
That was Warren Buffett being quoted towards the bottom of the last bear market a few years ago, by a main platform speaker at last year's Annual Meeting of the Million Dollar Round Table.
How do investors perceive world stock markets at this point? Are they fearful or greedy?
It takes a lot of courage to try to grasp a falling knife - and nothing best describes current market conditions. The weathervane of world stock markets, the Dow Jones, is still in correction territory - 'just' 13.54% down, as at last Thur-sday's close, from its all-time high reached only four months ago. However, in the Far East, markets have gone from the correction phase into bear market territory with drops exceeding 20%. The Nikkei is down 29% from its 2007 high last July 9, and the Hang Seng is 26% down from its all-time high last October 30. In Europe, the Cac 40 has barely grunted into bear territory with a 23% drop from its 2007 high on June 1, while both the FTSE 100 and the German Dax are, more or less, in line with the Dow Jones correction mode with drops of 14.6% and 16.3% respectively.
So what about us? The MSE index's high last year was 5,130.63 on January 11. Its lowest point this year was on January 31 at 4,812.05, a drop of 6.2%. By last Friday we picked up 1% with the index closing at 4,860.498. However, since its all-time high of March 28, 2006, we are still 27% down. Does that make it a time to buy? The last bear market witnessed a drop of 56.5% and lasted two years and nine months. But then no parameters have ever been prescribed for the depth and/or duration of a bear market.
During last week, trading on the Malta Stock Exchange plodded along with gainers outpacing losers five to seven. For the second week running, Fimbank plc (FIM) was the best performer gaining 5.2%, closely followed by International Hotel Investments plc (IHI)'s 5% jump. The losers' list was topped by Middlesea Insurance plc (MSI) with a 4.9% drop on turnover of 2,422 shares.
The negative mood in Bank of Valletta plc (BOV) persisted. It opened the week where it had left off at €6.31 but immediately traded lower. Between Monday and Wednesday, shares changed hands in a tight range of €6.31 to €6.289 with the week's largest single deal for 37,000 shares taking place at this latter price on Wednesday. On Thursday, it skidded to a year's low of €6.249 on a handful of small deals. There was no trade on Friday, so BOV ended the week at this level, 1% down. BOV's turnover was the week's highest with 67,850 shares traded for a value of €426,685 - 31% of the week's total equity turnover. At the end of trading, total bids for 305 shares were at €6.215, whereas offers of 1,500 shares started at €6.22.
HSBC Bank Malta plc (HSB) made small advances throughout the week on very thin turnover. The unusually low turnover of 16,154 shares for a value of €75,813 was transacted in a range from Monday's €4.66 open - the lowest price for the week - to Friday's highest of €4.725. Trading was sporadic with Tuesday the busiest day, seeing a turnover of 9,400 shares, and the slowest a mere 499 shares on Thursday. At the end of Friday's session, bids for 1,450 shares were at €4.711, while the best offer for 649 shares stood at €4.725.
HSB's board is to meet on February 18 to consider and approve the group's and the bank's final audited accounts for the financial year ended December 31, 2007, and to consider the declaration of a final dividend to be recommended to the bank's annual general meeting.
GO plc (GO) opened meekly up, 1c higher at €3.04. It was stable till Wednesday and looked set to advance on Thursday, rising to a high of €3.06. Two sales orders a few seconds from the closing bell dragged the price back to €3.03, for GO to close the week flat. There was no trading on Friday. Turnover totalled 22,195 shares for a value of €67,559. At the end of trading, best bids totalled 5,000 shares at €3.03 with a supply of 5,000 shares at €3.06.
IHI announced on Wednesday, that in a joint venture with Libyan Foreign Investment Company (LFICO) and Istithmar Hotels FZE (Istithmar) of Dubai, it has entered into an exclusivity and development agreement with the Crown Estate of the UK to develop a 283-bedroom deluxe five-star hotel, and a suite of adjoining luxury apartments, in central London. The Crown Estate last year declared its intentions to sell the former Metropole Hotel Building and the adjoining 10, Whitehall Place, and had invited bids worldwide. The joint-venture was chosen on the basis of the parties' proposals for the properties, as well as its development experience and financial capabilities to execute the project. On completion, the management of the five-star hotel operation will be entrusted to CHI Ltd to operate the property under the Corinthia brand.
IHI was stable at €1 on a sizable deal for 76,209 shares on Monday. On Wednesday, just after the release of the announcement, IHI bounced ahead 5% to €1.05, maintaining this level till Friday. For the week, a total of 121,709 shares changed hands for a value of €123,687.
Malta International Airport plc stumbled 4c9 to €3.152 in the early part of the week but recovered to €3.17 mid-week. It was stable for the rest of the week, closing 0.9% down. Turnover, for the first time in months, was robust with 80,025 shares transacted for a value of €253,473 - the week's second highest. At the end of the session, the best bid for 500 shares stood at €3.16, while offers for 10,000 shares started at €3.21.
FIM continued its positive run, rising further to hit $2 on Monday. It inched ahead to $2.015 on Thursday and closed the week at $2.02 - a gain of 5.2% - on brisk turnover of just over 82,000 shares for a value of €111,830.
Lombard Bank plc was on a constant decline, dropping 10c to €13.40 on Monday, a further 20c, or 1.5% on Tuesday, and rounding off the week with 1.5% loss to €13 on Thursday. Volume however was low with just 1,750 shares changing hands, for a value of €23,051.
Maltapost plc kept up the momentum, opening the week ahead at 66c. It was stable at this level, hitting an all-time high of 67c in the final deal for 216 shares on Wednesday. However, it closed the week minimally lower at 66c5, nonetheless 1.5% up on turnover of 350,223 shares.
MSI started out on Monday almost unchanged at €3.84, but sagged 22c to €3.66 on one deal for a microcosmical 18 shares. The week's remaining deals were effected at this level for MSI to close 4.9% lower.
Simonds Farsons Cisk plc was only active on Monday and Tuesday, losing 1.7% to €2.36, on turnover of just 2,000 shares. Plaza Centres plc only traded on Tuesday, 1.5% down at €1.537.
Crimsonwing plc charged forward, climbing 3.45% to 60c on a fairly active Monday which saw 52,054 shares change hands. It maintained this price for the rest of the week, barring occasional fractional variations, closing the week at 60c, up 3.45%.
Datatrak plc did not start 2008 on a good note. Its first trade this year was effected on Tuesday as the price sunk to a new all-time low of 29c, 4.9% lower than its last price. For the record, there were three deals for 9,212 shares.
In the Government Bond market, turnover by value reached €1.55 million with 28 deals struck in 13 stocks. In the corporate bond market, there were 38 deals for a total turnover value of €420,883. Turnover value in the Treasury Bill market totalled €768,065.
This report was provided by Financial Planning Services Limited, of Marina Court, G. Cali Street, Ta' Xbiex, which is licensed by the MFSA to provide investment services, including stockbroking (IS/3608). The company is involved in acting as sponsoring stockbroker and corporate stockbroker. The directors or related parties, including the company and their clients, are likely to have an interest in securities mentioned. Tel: 2134 4243 or E-mail: info@bonellofinancial.com.