18 - 24 January 2001

Share prices continue to tumble

by David Kelleher

The negative sentiment that is reigning on the local equity market continued yesterday as share prices continued to tumble. The result is that the market continues to move deeper into negative territory, while adding further to investors’ gloom.
There was little to smile about yesterday as the bad start to the week continued with investors shying away from putting more money into equities. Outstanding bids on the market have decreased to worrying levels, especially among the larger companies.
The MSE Index lost another 97.89 points since last Monday (3.07 per cent) and is now closer to the 3,000 points level, ending yesterday’s session at 3,091.93 points.
Middle Sea Insurance plc has taken a dip of over 21 per cent over the past eight trading sessions, half of which was registered this week. Aggressive dumping on the market brought the price down by 11.8 per cent since last Monday, hitting yesterday’s lower limit of Lm2.97,6, settling down at Lm3. Even Bank of Valletta breached its 52-week low during this week at Lm4.35, down a net 25c (5.4 per cent) since last week.
Trading in HSBC Bank shares was less hectic, consisting of six deals between Tuesday’s and yesterday’s sessions. 7,500 shares changed hands on Tuesday at an average of Lm6.18,3, while one deal of 9,000 shares was yesterday registered at Lm6.15.

Lombard Bank was active only on two days, losing 9c on Monday but recovering back all the loss during yesterday’s session.
Over 136,345 shares changed hands in Maltacom since Monday, bringing about a four per cent (9c5) loss in price down to Lm2.26, another new 52-week low.
The equity markets have failed to keep up last year’s performance with financial analysts seeing the steady drop in prices as a result of indifference in this sector of the financial market.
Most equities have struggled unsuccessfully to hold onto the gains they made last year, and are now well below their peaks registered between January and March last year. With decreases in prices registered for the first three weeks of this year, it is definitely a case that the bubble has burst. However, there are other factors that have caused such a drop in the equities market, sources said yesterday.
It is interesting to note that the three highest capitalised companies listed on the Malta Stock Exchange – Maltacom, HSBC and BOV – are all significantly lower than they were a year ago. At the same time, last year’s three IPO offerings are also trading below their issue price.
Financial sources told The Malta Business Weekly yesterday that markets overdo bullish sentiment and when share prices drop they exaggerate the bearish mood.
A lot of people were bitten by very aggressively marketed funds launched last year as their prices are now down substantially, some by as much as 40 per cent. One fund launched in the second half of last year has fallen by 24 per cent in the space of five months.
What is worrying, however, is that investors are not being given a clear picture of the long-term nature of equity investment. Although markets will go up or down, the feeling is that investors are not differentiating between getting proper advice and being sold financial products by people who are authorised only to sell but not to give advice.
“People are not making the distinction between a product seller and an independent financial adviser. If company A is selling shares in a particular fund which he represents, he can only be expected to push his product. Thus the investor is not receiving independent advice. Unfortunately, the client is not always aware of this,” sources said.
The rushed liberalisation of the stockbroking sector has also created a scenario that is not conducive to a positive performance. Brokers feel that the value of advice should not be turned into a commodity based on the cheapest price. Or, as sources put it, “free advice is worth exactly what you pay for it”.
The banks have not helped either and they are obviously doing their best to sell the products they offer.
“There are three types of stockbroker service:
• execution only, which involves a client giving a specific buy or sell order at a specific price;
• advisory services, when a client seeks advice before deciding; or
• discretionary services, when
a client gives the stockbroker
discretion, within certain criteria, over an amount of money and how it is to be invested,” the sources said.
“As the investment culture develops, consumers will learn to distinguish between aggressive product pitches and independent advice,” the sources added.