Although the MSE Equity Total Return Index retreated by 1.47% for the year 2017, Santumas Shareholdings p.l.c. (+78.57%), PG p.l.c. (PG) (+40%), Simonds Farsons Cisk p.l.c. (SFC) (+21.71%) and Malta International Airport p.l.c. (MIA) (+16.05%), recorded double digit gains. Moreover, GO p.l.c. and MaltaPost p.l.c. also were among the six equities that yielded a positive return.
The star performer for the year were Santumas Shareholdings p.l.c. shares, with a surge in value of over 78.57%. The equity traded across a relatively low volume of 313,972 shares.
2017 marked the first Initial Public Offering on the local equity market in four years, with the listing of PG. The equity staged a rally from its initial offering price of €1.00 to reach an all-time high of €1.50 within four months. PG shares recorded an annual return of 40%, with the closing price of €1.40, and ranked with Bank of Valletta p.l.c. and Tigne’ Mall p.l.c. as the top three most liquid equities of the year. Trading volume in the three equities represented 39% of the total equity trades.
Local Investors also traded SFC updates related to the Trident Park development. During the year, the share price rose from €7.00 to an all-time high of €9.69. The solid run-up quickly lost steam following the brewery’s announcement of the rejected Planning Authority (PA) approval, marking a 9% drop in share price in November. The equity partially recovered by year end, when the PA approval for the Trident Park Limited development was finally announced. Despite the heightened volatility, SFC shares recorded a 21.71% gain on last year, valued at €8.52 per share.
MIA shares touched an all-time high of €4.80 on the back of solid traffic results and the subsequent upward revision of the airport’s forecast passenger movements for the year, of 5.8 million passengers. MIA boasted double-digit growth in passenger movements for 14 consecutive months, with growth witnessed in the shoulder months, aircraft movements and improvement in seat capacity. The equity share price closed the year at €4.70 – up by 16.05% on the year.
On the other hand, the Index was primarily weighed down by the decline in share price across the leading banking equities, namely Bank of Valletta p.l.c. (BOV) and HSBC Bank Malta p.l.c. (HSBC). While HSBC shares were down by 6.11%, BOV shares fell by 13.88% since the start of 2017. The decline witnessed in BOV shares gained momentum during the second half of the year, following the announcement of the rights issue of 105 million new ordinary shares, offered at €1.43 per share. The rights issue was aimed at further strengthening the common equity Tier 1 capital, to meet future business requirements and capital buffers. The bank managed to successfully raise €150 million worth of capital, following an over-subscription by approximately €47 million. Consequently, BOV’s share price to some extent recovered from its yearly low of €1.74 to close the year at €1.80.
Active Corporate Bond Market
Total trading turnover in the local corporate bond market increased by 33% year-on-year, exceeding €77 million. The increase in supply was easily absorbed and, overall, the corporate bond market closed the year higher. The 4.5% Grand Harbour Marina p.l.c. Unsecured 2027, 3.5% Simonds Farsons Cisk p.l.c. 2027 and 3.75% Tumas Investments p.l.c. Unsecured 2027 were amongst the top performers, all exceeding the 4.5% return, closing at €105.40, €104.65 and €104.50, respectively. On the other hand, the 7.5% MeDirect Bank p.l.c. Subordinated Bonds EUR 2019 corrected by 6.42% to €105.75.
Flattening Sovereign Yield Curve
In line with other European sovereign counterparts, the local sovereign yield curve recorded an upward movement in yields, and consequent downward move in prices, during the year. However, across the different maturities, the rise in yields and, therefore, fall in prices was mainly recorded across the shorter dated and government stocks maturing within the next 15 to 20 years. As a result, the yield curve has flattened and the term premium, which represents the higher required return to hold a longer dated investment, has diminished.
European Central Bank (ECB) President, Mario Draghi, announced the bank’s reduction of asset purchases from €60 billion to €30 billion euros, from January 2018, while extending the quantitative easing programme until at least September 2018. The flattening yield curve reflected the more dovish start of tapering of the ECB’s asset purchases and expectations for a low interest rate environment in the foreseeable future.
Published on It-Torca - Sunday 14th January 2018
Rachel Meilak holds the position of an Investment Specialist at BOV Asset Management Limited (“the Company”). The writer and the Company have obtained the information contained in this document from sources they believe to be reliable but they have not independently verified the information contained herein and therefore its accuracy cannot be guaranteed. The writer and the Company make no guarantees, representations or warranties and accept no responsibility or liability as to the accuracy or completeness of the information contained in this document. They have no obligation to update, modify or amend this article or to otherwise notify a reader thereof in the event that any matter stated therein, or any opinion, projection, forecast or estimate set for the herein changes or subsequently becomes inaccurate. Past performance is not necessarily indicative of future results.