e Business OBSERVER
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April 9, 2015
19
STOCK MARKET REVIEW
declared any dividends to its shareholders since its Initial Public Offering. Instead, this share price responded positively to the announcement that the company is currently in discussions with various third parties who have expressed an interest to invest in the Manoel Island project and Midi confirmed that it intends to conclude an agreement with one of these parties. This confirms the increased responsiveness by the local equity market to companyspecific developments. Another important development during the first three months of 2015 was the successful takeover of Crimsonwing plc by KPMG. An extraordinary general meeting is taking place on April 17, which will then lead to the delisting of the company’s shares from the Official List. The only negative performer since the start of the year was Fimbank plc as its US dollar denominated equity lost 16.7 per cent to close at the $0.50 level after recovering from a fresh all-time low of $0.43. Sentiment towards the company remained negative at the start of the year in anticipation of the 2014 financial statements and following the credit rating downgrade by Fitch. The international rating agency downgraded Fimbank’s rating to ‘BB-‘ from ‘BB’, citing the
significant deterioration of the bank’s asset quality, resulting in unstable and weak earnings. Fimbank reported a pre-tax loss of $53 million for 2014. While the equity market threw up some surprises during the first three months of the year, the extent of the continued positive performance of the bond market may also have caught many investors unaware. The Rizzo Farrugia MGS Index climbed by a further 5.3 per cent with all the medium- and long-term Malta Government Stock prices rallying to consistent fresh record levels following the official announcement of the quantitative easing programme. Trading activity across the MGS market surged to an
all-time high of €143 million during the month of February but declined sharply to below €85 million following the huge over-subscription of the new 25-year issue and the resultant lack of supply on the secondary market. On the other hand, the new issuance market for corporate bonds was much weaker than expected, especially after the Malta Stock Exchange published a tentative calendar revealing the potential of up to €172 million in new bond issues during the first six months of 2015. While some may have been delayed due to the stringent requirements and time frames for preparing documentation and obtaining approval, others may have
been cancelled outright due to changing circumstances. The demand for fixed interest securities by both retail and institutional investors was very evident again during the February MGS issue and hopefully various investment opportunities will hit the market during the second quarter to provide suitable avenues for the growing investor population. The second quarter of the year will be dominated by the remaining full-year result announcements of Tigné Mall plc, RS2 Software plc, 6pm Holdings plc, MIDI plc and Global Capital plc which have to be published by the end of April. However, the more important development for the equity market will be the interim financial statements as at March 31, of Bank of Valletta plc, especially following the surprise announcement last Thursday about the legal proceedings for €363 million instituted against the bank before an Italian court. Although BOV announced that it received a legal opinion clearly stating that there is no basis at law for the claim as it is completely unfounded, this major item is likely to dominate sentiment around the bank’s equity until further clarity is provided to the market at large. Edward Rizzo is a director at Rizzo, Farrugia & Co. (Stockbrokers) Ltd.
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