Another holiday-shortened week, due to a bank holiday on Monday, saw global indices falling as investors continue to lose their appetite for risk. As they fled equities, with the result that equity prices experienced another week of decline, with some indices registering their worst week in 2012. By contrast, German bunds recorded higher prices and hence lower yields as investors flocked in to hedge themselves against the negative sentiment which has recently resurfaced.
Last week, equity markets were largely affected by peripheral bond yields, which are a measure of a country’s resilience, with Spa-nish and Italian government bond yields continuing to creep higher, to reach levels deemed unsustainable.
On Thursday, a bond auction by the Italian government was well received but the prices investors demanded was painful.
The more-than-forecast slowdown in China’s economic growth continued to spook markets, while towards the end of the week markets slumped as the cost of insuring against a Spanish default reached a record high.
On Friday, investors battered the euro as risk-averse investors sought a safer home in the US Dollar, despite a drop in consumer confidence in the US.
The Malta Stock Exchange index closed the week with a 0.77% decline following a fragile 0.4% gain in the previous week. Last week the MSE index moved from positive to negative territory twice, but gains were minimal and clearly outnumbered by the losses in another two sessions.
The two major banks and a number of small-cap equities closed lower while Lombard Bank plc was the only equity to snap a gain while another nine equities closed the week unchanged.
In terms of liquidity, activity in RS2 Software plc jumped to nearly 97,000 shares. The local index closed the week at 2,927.347 points, hence down 5.4% since the beginning of the year.
In the banking sector, HSBC Bank Malta plc was the hardest hit last week as the equity shed 1.6% on declining volumes. In fact, a total of 17,400 HSBC shares were traded across nine deals as the equity’s price hovered between a high of €2.55 and a low of €2.50, the week’s closing price.
Bank of Valletta plc failed to retain the previous week’s 1% gain as the equity closed nearly at a new two-and-half year low of €2.11, down 1.4% or €0.03 on the week. The bank was the second most liquid equity as 76,400 shares were traded in 44 transactions, down from 122,000 shares traded in the previous week.
Lombard Bank plc shares gained 0.6% as three deals of 20,700 shares in Friday’s sessions pushed the bank’s price to €2.465. Meanwhile, Middlesea Insurance plc, the only other financial active last week closed flat at €0.70 following an uneventful week. The equity’s price barely changed as seven thin trades of 3,000 shares were executed. The company’s annual general meeting will be held on Friday at which the board of directors will recommend that a final gross dividend of €0.01 per share be declared.
Activity in Simonds Farsons Cisk plc (SFC) surged ahead of the board of directors’ meeting to be held on April 25. The financial statements for the year ended January 31, 2012, will be considered together with the consideration of a final dividend to be recommended to the annual general meeting.
Last week, over 42,500 SFC shares were traded in three deals all executed at €1.77. Since January the equity has lost 1.7%.
Go plc shares took some respite from the recent weekly falls as the equity closed flat at €0.77. The company seemed to be heading for another decline, after having traded at an intra-week low of €0.75, but two deals of 2,000 shares mid-week levelled the price to the previous week’s close. Liquidity dried up as 10,450 shares were traded.
Meanwhile, RS2 Software plc traded flat at €0.55 on improving volumes. Late on Friday the company announced its financial results for the year ended December 31, 2012.The company reported that turnover for 2011 amounted to €8.8 million, a sharp 18% increase over the previous year. Pre-tax profit rose 32% to €2.5m from €1.9m in 2010. Group pre-tax profit was €2.4m, a 47% rise over 2010. The board resolved that a dividend will not be paid as the company intends to use the funds to expand its business. Meanwhile at the AGM scheduled for June 12, the board will recommend a bonus share issue of one share for every 15 held. This will be given to registered shareholders as at close of business on May 11.
Last week, 6pm Holdings plc announced that its board of directors is scheduled to meet tomorrow to consider and approve the audited financial statements for the year ended December 31, 2011. The equity was last traded on February 13.
Due to the lack of liquidity on the MSE, heavy price volatility tends to be a risk feature for small caps. Last week Santumas Shareholding plc was a case in point. Since the beginning of the year the equity was only active twice as insignificant volume was traded. After an absence of over two months, last week one deal of 550 shares on Friday pushed the equity’s price down 14%, or €0.30, to end the week at €1.80.
Similarly, Loqus Holdings plc, which was active for the first time this year saw an 8% drop in its share price after a deal of just 100 shares. Another deal, this time of 1,000 shares, in Island Hotels Group plc left the equity’s price intact at €0.85.
Likewise, International Hotel Investments plc traded flat at €0.74 as three deals of 2,900 shares were executed. Grand Harbour Marina plc lost a mere 0.4% to end the week at €1.89, while Plaza Centres plc closed at €1.80, Maltapost plc at €0.93 and Medserv plc closed at €3.95.
Malta Government Stock (MGS) prices generally increased last week as investors bought safer assets as an alternative to risky equities. As a result, yields declined, following higher yields in the first quarter of the year. Last week a total of €17.6m were traded in local government bonds.
In the corporate bond market, liquidity almost doubled as €1.2m exchanged hands over 72 deals. High-yielding corporate bonds experienced some losses while a number of bonds issued by banks gained.
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.