169% increase in Malta Stock Exchange Index for 1999

by Anthony Manduca

Globe Financial Stockbrokers Limited has just published its regular bi-annual Capital Market Survey. This document analyses the performance of those companies with an ordinary equity listing on the Malta Stock Exchange, covering the share price performance and the market performance over the previous six-month period.

In this report Globe Financial Stockbrokers Limited also offer their recommendations covering the next six-month period based on their professional opinion.

In the January 2000 report, Globe explain that although the stock market witnessed an incredible appreciation during 1999, this was not totally unexpected. Today, with hindsight everyone understands and appreciates that Malta's blue chip companies quoted on the Exchange were undervalued.

Figure 1 depicts the extent of the rise in the Malta Stock Exchange index for 1999 compared with 1996, 1997 and 1998.

Investors have become aware of the potential returns achieveable in the equity market. This has created an impetus towards equity investments, away from the bond markets and fixed deposit accounts.

Of interest is the turnaround in the investment culture witnessed between 1998 and 1999. Globe Financial Stockbrokers Limited report that the total number of deals executed on the Exchange during 1999 rose by 98 per cent from 8,507 deals during 1998 to 16,839 deals executed during 1999.

Of these 16,839 deals, 78.5 per cent were executed in Equities, 3.7 per cent in Corporate Bonds and only 17.8 per cent in Malta Government Stock. This is in sharp contrast with the distribution of investments during 1998, whereby 48.5 per cent were Equity transactions, 5.4 per cent Corporate Bond transactions and 67.5 per cent Malta Government Stock transactions. This clearly shows that the Maltese investor culture has changed drastically from a fixed interest security or fixed deposit account to the equity investment culture.

This change is viewed very positively, since the investment culture is displaying heightened confidence in the performance of Maltese companies and the Maltese economy in general.

Globe Financial Stockbrokers Limited also report in their Capital Market Survey of January 2000 the equity spread of the Market Capitalisation, which as at 31 December 1999 stood at Lm1.6bn or US$3.87bn.

Figure 2 illustrates this spread clearly, with Maltacom plc Ordinary shares covering 43.33 per cent of the Market Capitalisation, Bank of Valletta plc Ordinary Shares 19.75 per cent and HSBC Bank (Malta) plc covering 15.60 per cent.

In the report, Globe Financial Stockbrokers Limited also stress the importance that individuals considering acquiring or disposing of any of the securities quoted on the Malta Stock Exchange should seek professional advice from authorised investment services firms, such as Globe Financial Stockbrokers Limited, in order

to establish whether that particular investment decision is in line with their financial needs or requirements.

Suitability for a specific type of investment vehicle has to be determined and the potential risks involved must be explained and understood.