13 August 2003

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Equity volumes fall 21 per cent over Q2

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 year’s 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 income securities.
Treasury bills
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 lower.
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.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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