Local equity market post-COVID recovery being buoyed by bonds

The local equity market is recovering after the COVID-19 lockdown measures led to a decrease in market activity and decrease in share prices, BusinessToday has learned


The local equity market is recovering after the COVID-19 lockdown measures led to a decrease in market activity and decrease in share prices, BusinessToday has learned.

Sources within the industry said that once measures started being introduced to combat coronavirus, the equity market immediately started to feel the strain.

The first of the companies listed on the Malta Stock Exchange to feel the heat when the authorties announced the closure of Malta International Airport and a compulsory quarantine for anyone visiting Malta, were those with close links to tourism.

Among these were MIA itself, Farsons Group and Corinthia Group, which was also affected by its international holdings.

As more measures were introduced, more listed companies started showing signs of strain. This was the case when the government announced social distancing rules, including advising elderly people to stay inside. Then it was listed companies like Plaza and Main Street Complex that started sliding on the stock exchange.

This was exactly in line with what happened globally, a financial analyst told BusinessToday. “Each and every measure introduced tended to affect companies listed on various exchanges, depending on their core focus,” he said.

“Another notable development was the fact that many companies, including those listed on the Malta Stock Exchange, suspended their decisions to announce or issue dividends, in a bid to assist the company’s cashflow.”

In fact, in Malta, the various banks’ board of directors were the first to recommend a suspension of dividends, followed by many other companies.

“Farsons, which at the onset of the pandemic made it clear that it could take a hit due to a percentage of its business depending on tourists, did not announce dividends this year,” the sources said.

The board of directors of GO plc went as far ta revise its recommendation for a dividend from 14c to 10c. GO CEO Nikhil Patil told BusinessToday that various measures were implemented to ensure that GO continued to provide the best possible service to its customers during the COVID-19 pandemic while safeguarding its employees, shareholders, and the long-term stability of the business.

“In the light of a continued positive financial performance throughout the crisis coupled with the recently announced lifting of travel restrictions, the Board of Directors considers a dividend payment of €0.10 to be a prudent and equitable way forward which will enable GO to continue sustaining strategic investment in its network and connectivity during the pandemic, while delivering a solid return on investment for our shareholders,” he said.

“The proposed €0.10 final dividend together with the special interim dividend of €0.41 paid in 2019 from the partial sale of GO’s shareholding in BMITT result in a total dividend return for year 2019 of €0.51.”

Bonds leading recovery

Sources said that one of the most meaningful measures introduced by the government was the decision to underwrite bonds that were due to mature this year.

“The government offered assistance to those companies with a reduced cashflow and who had bonds coming up for maturity,” the sources said.

“The government also promised to underwrite any mature bonds that remained unsold.”

The measures seemed to bouy the bonds market.

GO plc announced that CableNet, its Cypriot subsidiary, would be issuing bonds in Malta to be used by the company in Cyprus.

Shoreline too announced recently it would be issuing bonds valued at €40 million and maturing in 15 and 25 years.

And as lockdown and distancing measures started to be eased, industries started to recover and this started to show on the stock exchange.

“In the past three weeks, however, activity on the Malta Stock Exchange has fallen considerably, particularly with regards to shares,” the sources said.

This is probably due to the fact that many possible investors are awaiting the publication of companies’ financial results for 2019.

These reports are usually published in April, but at the onset of the pandemic, financial authorities announced the deadline for the publication of financial results would be extended from the end of April to the end of June.

Once a company published its financial results, stockbrokers are obliged by law to issue financial analysis summary with their forecast for the company’s outlook for the following year.

“But with the fluidity of the COVID-19 pandemic, with no clear end in sight, investors might be thinking that these financial analysis summaries could very well turn out to be useless.”

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