Lancing the boil

The cross-continent credit crunch crisis, recently further exacerbated by the travails of bond insurers MBIA Inc and Ambac, has seen world equity, bond and property markets experience one of the worst ever starts to a new year.

In the first month of 2008, Hong Kong's Hang Seng Index and the German Dax had lost more than 15%, France's CAC 40 was down 13%, and Japan's Nikkei 11%. At its lowest point last Thursday, the UK's FTSE 100 share index was down 12% for January, but a substantial late rally reduced the double digits to a more contained 9%. This was still one of this index's worst performances on record for January. February opened firmly forward. Most indices continued the bounce-back which started on Thursday, following the US Federal Reserve's cut in interest rates - the second in nine days - last Wednesday evening. Some analysts feel that this second bid to avoid a recession in the US, following the previous week's cut in an unscheduled meeting, is sending out the wrong signals. US interest rates are nearly 50% lower than they were just six short months ago - down from 5.25% to 3%. And yet the market does not seem convinced that these rate cuts - for the purists, a reduction of 42.85% - will be enough to avoid a recession.

Maybe a crash is what international markets need to lance the boil that has ballooned on the financial world's posterior. It would let out the pus of select super bankers' subprime self-indulgence. Then, once the massive interest rate cuts have worked their way through the economy, we can only hope that the healing process will not be too lengthy.

By comparison, the drop of 2.45% in the Maltese market, is nowhere near the double digit year-to-date losses of five of the world's major markets.

Maltapost plc (MTP) remained its darling last week, attracting strong volume while keeping its head firmly above the 60c level. Monday's close of 61c1 was the week's low, as MTP closed at successively higher prices to end Friday in style at an all-time high of 65c5 - a thrilling 31% higher than its IPO price on January 15. MTP was by far the week's most active equity with 550,456 shares changing hands for a value of €350,379. At the end of the session, best bids for 2,173 shares started at 65c, while offers of 11,099 shares were at 66c. On Thursday, MTP announced that Graham A. Fairclough, a director and company secretary of Lombard Bank Malta plc (LOM), was appointed company secretary. It further announced notification by GasanMamo Insurance Ltd that on January 25, the latter had exceeded the threshold of 5% voting rights of MTP. The shareholding position in terms of voting rights amounted to 1,591,160 shares (5.683%) - with GasanMamo Insurance Ltd holding 383,723 shares directly, and the balance held in custodians' names.

In the light of the previous week's interim directors' statement from Bank of Valletta plc (BOV), the mood turned decidedly sour. BOV opened on Monday at €6.50 - the week's high - and slipped from session to session, hitting a low of €6.30 on Thursday. On Friday, it managed to stem its losses, trading around this level and closing at €6.31, down an unpleasant 3.66% on the week. It registered the second highest turnover by value at €323,547 as 50,224 shares changed hands. At the end of the week, total bids for just 86 shares were at €6.31, whereas offers of 2,764 shares started at €6.349. BOV announced on Thursday that following the allotment of bonus shares, the issued and paid up share capital is €100 million, divided into 133,333,333 ordinary shares with a nominal value of €0.75. BOV has an authorised share capital of €150 million, and a market capitalisation of €841,333,331.

HSBC Bank Malta plc (HSB), seemingly taking the lead from BOV, had an equally dismal week. It dilly dallied in a range of €4.839 to €4.804 between Monday and Wednesday. Thursday saw it nose-dive a full 3% to €4.658. It was close to flat on Friday, ending at €4.66, a rather unpalatable 3.9% lower, earning itself the tag of week's worst performer. Turnover for the five days was low at 30,745 shares for a value of €145,430. At the end of trading, the best bid was for 530 shares at €4.519, while the best offer for 2,000 shares stood at €4.75. HSB's results for the year ended December 31 are expected in mid-February.

GO plc (GO) again had an uneventful week, with almost all deals negotiated at the unchanged price of €3.03. On Tuesday, GO announced that with its majority shareholder, Emirates International Telecommunications (Malta) Ltd (EITML), it has acquired the total issued share capital of Forgendo Ltd, a company registered in Cyprus. The share capital of Forgendo Ltd is split equally between GO and EITML. Subject to the relevant regulatory approvals, Forgendo Ltd has entered into mutually binding share purchase agreements with each of a) Novator Equities Ltd, b) Cycladic Catalyst Master Fund, and c) the Foundation of Research and Technology Hellas (Forth) - the sellers. The acquisition of a total of 8,158,912 shares (approximately 21% of the total issued share capital) in Hellenic Company for Telecommunications and Telematic Applications S.A. (Forthnet) is for a cash consideration of €93.8 million, equal to €11.50 per share. Forthnet is a Greek company listed on the Athens Stock Exchange. After the completion of this transaction, Forth will still hold 6.21% of the total issued share capital of Forthnet. GO's announcement left the market cold, with turnover totalling 65,145 shares for a value of just under €200,000. At the end of trading, best bids totalled 775 shares at €3.021, with a supply of 2,000 shares at €3.04.

Malta International Airport plc opened slightly ahead but retreated to €3.20 by the end of the week on thin trade to close unchanged. Total weekly volume amounted to just 8,330 shares for a value of €26,700. At the end of trading, best bids totalled 2,300 shares at €3.152, with a supply of 2,420 shares at €3.21.

International Hotel Investments plc was glued to the €1 mark, with all the week's fairly robust volume of 115,223 shares changing hands at this price.

Fimbank plc (FIM) was static on Monday at $1.749 and gained 2c to $1.77 on Tuesday, when it announced that State Bank of India (SBI) intends to purchase 91% of the total paid-up equity share capital of Global Trade Finance Ltd, from Export-Import Bank of India, International Financial Corporation and FIM. SBI is seeking approval from the Indian regulators, whereas FIM has already obtained consent from the MFSA. This announcement spurred the price forward, closing at $1.82 on Wednesday, $1.86 on Thursday, and at $1.92, on Friday catapulting 9.8% for the week. Volume was a robust 140,460 shares for value of $170,152.

LOM and Medserv plc (MDS) only traded on Monday; LOM closed 0.7% lower at €13.50 on turnover of 2,915 shares, while MDS shed 2.5% to €4.044 on two trades for a total of 3,400 shares. Likewise, Simonds Farsons Cisk plc was only active on Wednesday, with 2,100 shares changing hands to close flat at €2.40.

Crimsonwing plc was stable at 55c on Monday and Tuesday. After a mid-week break, it closed at 58c on both Thursday and Friday, to end the week 5.4% ahead. Turnover was buoyant with 109,192 shares traded for a value of €62,197.

Grand Harbour Marina plc lost 0.9%, closing at €1.73 on a turnover for the week of 9,600 shares.

In the Government Bond market, turnover by value reached €4.8 million with 33 deals struck in 13 stocks. In the corporate bond market, there were 53 deals for a total turnover value of €2.2 million. Turnover value in the Treasury Bill market totalled €717,601.

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. E-mail: info@bonellofinancial.com or tel: 2134 4243.