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Gerald Fenech
The latest Government stock issue offered to the general public, failed to whet the appetite of investors. In fact, unlike other bond issues, this particular one took all the pre-announced period for acceptance of funds and did not close before. Informed sources told Business Today that there was inertia from the side of investors, and stockbrokers that carried out the routine mail-shot for their clients did not get the usual response.
The Exchequer offered two kinds of Stock one at 5.7% Fungible issue at LM105.95 for every Lm100 and closing on 2012, and a second at 5.1% also a fungible issue at Lm103.64 for every Lm100. The premium requested was considered by knowledgeable investors to be steep and this could have been a deterrent.
Sources from within the Financial Community also told this newspaper that the recent Bond issue by GAP Developments plc which was offering an attractive 7% interest coupon and issued at par, seriously affected liquidity on the market thus making the Government stock issued rather badly timed.
Other sources commented that the rising interest rates with commercial banks offering top quality deposits at rates just below 5% also had its impact. The same sources commented on the GAP issue describing it as a “junk” Bond carrying an abnormal high risk. However, the fact that Bonds are issued unrated, but sponsored by licensed Financial Institutions, at least serve investors to know that the prospectus has adequate information for them to take an informed decision and not just rely on the attractiveness of the coupon.
The government of Malta had announced that during this year, new bonds will be issued to partially service the recurrent deficit expected to be experienced by the year end. |
