The Malta Stock Exchange yesterday closed in the red at 4,658 points, a reduction of 0.8 per cent from its previous reading, with losses in three of the larger equities by market capitalisation. Significant volumes in Lombard Bank stole most of the limelight during the session, although the equity failed to register any change.

Maltapost traded marginally higher on yet another noteworthy volume levels. The equity claimed the €0.703 level, which equates to this year's high.

The heaviest loss was registered in Go, as the equity started to trade ex-dividend, thereby forfeiting the right to receive a final net dividend of €0.1165. The equity factually traded 11c4 or 3.6 per cent lower to €3.03 over a small volume of 554 shares across two trades.

Trading activity in International Hotel Investment consisted of a single deal of 3,600 shares, with the price trading at €1.02, which equates to a 1c5 or 1.5 per cent reduction on previous trading levels.

A sole trade in HSBC Bank Malta consisting of 300 shares depressed the price by 3c8 equivalent to a loss of 0.9 per cent to close at €4.38.

Lombard Bank Malta was by far the day's most liquid and actively traded equity. During yesterday's session a grand total of 453,850 shares, carrying a market consideration of €5.9 million, were swapped across 17 transactions. Most trades were executed at the €13.00 level, unchanged from its previous closing level and leaving, at the end of the session, 6,000 shares best bid at €12.50 against supply of 500 shares best offered at €13.05. Lombard Bank Malta is due to report their full year results and final dividend proposal today.

Malta International Airport was the other non-mover with 2,975 shares being dealt across three transactions at the going price of €3.33.

Weekly UK economic review

The Monetary Policy Committee (MPC) kept the bank rate on hold at 5.25 per cent as it was widely expected. Growing concerns over the growth-inflation trade-off have worsened, as lower growth rates for 2008 may not connote to lower inflation.

The Bank of England's projections are suggesting that the Consumer Price Index (CPI) will top three per cent this year, which would require the Governor to write an explanatory letter to the Chancellor.

The MPC must strive to anchor down inflationary expectations. If households and businesses start to believe that inflation will not be kept low and stable, they will start to factor this into their decisions. Inflation reacts with a lag to slowing growth rates, but in today's macroeconomic scenario, UK's inflation rates may turn out to be more sticky than usual.

These lagging implications may be attached to a number of factors. A depreciating sterling has raised cost of imports (the sterling is down approximately 16 per cent against the euro and three per cent against the dollar compared to March 2007). Secondly, UK businesses are dealing with input prices at 16-year highs and profits may eventually suffer if they do not pass on some of their costs to consumers. Finally, the deflationary impetus from emerging markets may start abating, for example China's inflation has reached 8.7 per cent in February.

This article has been prepared by Bank of Valletta p.l.c. (the Bank), which is licensed to conduct investment services business by the MFSA, for your general information only. This information is not a solicitation or offer by the Bank to acquire or sell securities. Nor does it constitute any form of advice by the Bank. Appropriate advice should be obtained before making any such decision. Past performance is not necessarily a guide to future performance and the value of your investments may fall or rise.

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