Equity volumes fall 21 per cent
Volume in the equity market fell by Lm0.8 million to Lm3
million, or 21 per cent, during the quarter under review, as the surge
in activity recorded in some equities during the previous quarter tapered
off, the Central Bank of Malta reports in its review of this years
second quarter. Equity prices, however, extended the gains recorded
during the previous quarter, rising by 1.2 per cent during the four
months to April.
The number of bond issues in the primary market increased during the
March quarter, as issuance activity in the corporate sector remained
robust. Meanwhile Government, in line with its indicative calendar for
securities issues, proceeded with the first Malta Government Stock issues
for the year. In February, Government raised Lm55 million through two
bond issues and at the same time redeemed Lm28.1 million worth of stock.
One issue consisted of Lm35 million worth of debt, maturing in 2010
and offering a coupon rate of 5.4 per cent, while the other consisted
of Lm20 million worth of 5.9 per cent Malta Government Stock 2015. The
non-bank public, mainly households and collective investment schemes,
took up most of these issues.
The private sector continued to take advantage of falling bond yields,
resorting to the capital market during the quarter under review. In
February, International Hotels Investments p.l.c. raised a total of
Lm9.4 million through two issues of ten-year bonds, one denominated
in Maltese liri and the other in euros. While the euro-denominated debt
offered a coupon rate of 6.2 per cent for the first seven years, rising
to 6.8 per cent thereafter, the bonds denominated in Maltese liri offered
a rate of 6.3 per cent.
Turnover in the secondary market for Government stocks fell to Lm4 million
in the three months to March, from Lm5.2 million in the previous quarter,
with participation by the Central Bank once again being minimal. The
Government bond issues referred to earlier, which were subsequently
listed on the Stock Exchange, accounted for a notable part of total
volume, with most of the rest being spread rather thinly among a few
securities. Bond yields continued to decline in the quarter under review
partly reflecting developments in bond markets abroad. Corporate bond
trading on the secondary market edged up to Lm3 million, from Lm2.4
million in the previous quarter. Trading was mainly concentrated on
a few securities, including the newly issued corporate bonds referred
to earlier, following their admission to the Exchange. In general, corporate
bond yields eased during the quarter, in line with yields on other fixed
The Treasury continued to raise funds in the money market, issuing Lm224.7
million worth of bills, up from Lm205.7 million in the previous quarter.
Once again, issues consisted mainly of bills with a three-month term
to maturity, with six-month bills accounting for the remainder. Banks
participated more heavily than in the previous quarter, purchasing over
four-fifths of the total issued, while other investors took up the rest.
The primary market three-month Treasury bill yield moved further below
the central intervention rate during the quarter.
This may have reflected expectations that the Central Bank would ease
its monetary policy stance following cuts in official interest rates
abroad. Thus, the yield dropped to 3.46 per cent by the end of April,
from 3.67 per cent at the end of December. Turnover in the secondary
market for Treasury bills more than doubled to Lm47.5 million during
the March quarter, up from Lm20.4 million in the previous three months.
This reflected strong demand by banks, which were net purchasers, as
well as increased participation by the Malta Government Sinking Funds.
Activity involving the Central Bank, on the other hand, was minimal.
As in the primary market, secondary market Treasury bill yields moved
The synthetic three-month yield, which is a weighted average of money
market yields on the three currencies that make up the Maltese lira
basket, shed 32 basis points in the four months to April, following
monetary policy easing abroad.
Given that the yield on domestic three-month Treasury bills declined
by a smaller amount, however, the spread between the two widened to
93 basis points, from 82 points at end-December.