MSE Share Index at new 32-month low

Following three consecutive weeks of a marginal increase, the MSE Share Index moved back into negative territory this week as it plunged 1.5% during the last five sessions to a new 32-month low of 2,960.079 points. This week’s decline was mainly due to the 3.2% drop in the share price of HSBC Bank Malta plc to €2.55 after turning ex-dividend as well as the 3.9% slide in the share price of International Hotel Investments plc to €0.75 as investors await its 2011 full-year results publication.

This week’s worst performer was GO plc with a 9.3% decline to its all-time low of €0.76 following this morning’s full-year results publication which revealed a record €51 million loss. The subdued performance is again solely attributable to the losses incurred by the Greek telecommunications company Forthnet (in which GO and its major shareholder have a stake of 41%) which offset the steady performance of the Maltese operation. In fact, Forthnet’s losses, which included a €128.5 million impairment of goodwill on its Pay-Tv business, led to a €62.3 million charge in ‘losses attributable to investments in jointly-controlled entity’. Coupled with the previous years’ write-downs, GO’s indirect investment in Forthnet (originally valued at around €120 million) is now worth only €3.6 million. For the first time since the privatisation way back in 1998, GO’s Directors did not recommend a dividend. The Directors explained that at this stage it is important for the GO Group to replenish its reserves after these have been depleted by the various impairments on GO’s indirect investment in Forthnet in recent years. GO now ranks as the eight largest company by market capitalisation compared to a fourth position in early 2010.

On the other hand, FIMBank plc topped this week’s rankings with a 13.3% jump to USD0.85 on significantly high volumes amounting to 1,295,000 shares (representing 0.95% of the outstanding shares). The interest in the equity was ignited by an announcement that revealed the possible transfer of shares amounting to 38.8% of the total issued share capital from the largest shareholder Massaleh Investments K.S.C.C. to Burgan Bank, a Kuwait based bank, which also intends to inject further equity into FIMBank to increase its potential stake above 50%. This will in turn trigger a mandatory bid. Meanwhile, FIMBank’s equity is still trading with the entitlement to the net dividend of USD0.02 per share together with the 1 for 25 bonus issue as announced in this week’s 2011 preliminary financial results publication.

On the bond market, the Rizzo Farrugia MGS Index rounded off a dismal week with a further marginal decline to yet another 3-month low of 983.019 points. This reflects this week’s sharp recovery in yields from a low of 1.74% to 2% this morning on the back of renewed investor confidence following the publication of positive economic data from Germany and the United States as well as a respite in Greece’s sovereign debt crisis after the country managed to successfully complete a debt swap with private investors and subsequently obtain its second bailout amounting to €130 billion. This afternoon, yields extended their recovery as they broke through the 2% level to reach a 3-month high of 2.07% on some further positive news from across the Atlantic.