Issue link: https://maltatoday.uberflip.com/i/1477178
25.08.2022 6 MARKETS Symbol Volume Value Trades High Low Open Closing Change Code Traded Traded Trades Price Price Price Price EQUITIES APS 86,500 56,756.13 8 0.665 0.650 0.660 0.665 0.005 BMIT 150,000 70,500.00 5 0.470 0.470 0.470 0.470 0.000 IHI 80,000 54,250.00 3 0.680 0.670 0.680 0.670 0.010 MIA 2,900 17,275.00 3 6.000 5.950 5.950 6.000 0.050 MMS 5,000 9,000.00 1 1.800 1.800 1.800 1.800 -0.010 SFC 2,700 20,250.00 2 7.500 7.500 7.500 7.500 0.300 GOVERNMENT STOCKS G29B 453,000 457,983.00 2 101.100 101.100 101.100 101.100 1.060 G30A 2,200 2,666.62 1 121.210 121.210 121.210 121.210 0.730 G39A 5,000 4,500.00 1 90.000 90.000 90.000 90.000 0.000 CORPORATE BONDS AX32A 10,000 10,048.00 2 100.480 100.480 100.480 100.480 0.480 DN33A 20,500 21,236.02 5 103.600 103.490 103.490 103.600 0.600 FR32A 20,000 20,000.00 2 100.000 100.000 100.000 100.000 0.000 GH27A 60,000 60,900.00 2 101.500 101.500 101.500 101.500 0.500 GO31A 35,600 35,742.40 4 100.400 100.400 100.400 100.400 0.000 HF27A 6,000 6,060.00 1 101.000 101.000 101.000 101.000 0.500 HF29A 10,000 9,850.00 1 98.500 98.500 98.500 98.500 1.490 IH26A 3,700 3,718.50 1 100.500 100.500 100.500 100.500 0.500 MR26A 1,000 1,000.00 1 100.000 100.000 100.000 100.000 -1.400 MY32A 72,900 74,505.20 3 102.400 101.950 101.950 102.400 0.400 ON34A 3,100 3,158.90 1 101.900 101.900 101.900 101.900 -0.100 PC26A 8,000 8,080.00 2 101.000 101.000 101.000 101.000 -0.490 SA32A 400 409.96 4 102.490 102.490 102.490 102.490 0.000 SH32A 9,000 8,820.00 2 98.000 98.000 98.000 98.000 2.000 SM31A 17,200 17,720.00 5 104.000 103.000 103.000 104.000 1.000 ST29A 10,000 10,100.00 1 101.000 101.000 101.000 101.000 0.990 TI24A 500 503.00 1 100.600 100.600 100.600 100.600 -1.400 VR27A 12,600 12,705.50 3 100.990 100.250 100.250 100.990 0.990 Malta Stock Exchange Regulated Main Market Trading Date: 24 Aug 2022 Equity markets may have just turned a corner THE most recent inflation read- ing out of the US for the month of July has shown that, whereas overall Consumer Price Inflation (CPI) remains high, the speed at which price levels have risen has slowed significantly. Moreover, the month-over- month change in CPI has dipped to zero. Core prices registered a 5.9 per cent increase year-over- year last month, below the con- sensus estimate of 6.1 per cent. If sustained, this trend should generally be bullish for equities, bonds and the US economy. Of course, the path to lower inflation will not be linear, but the downtrend should be main- tained, given easing supply dis- ruptions and much tighter mon- etary and fiscal conditions. Granted, the level of inflation remains at a 40-year high, which will continue to erode consum- ers' spending power and sustain pressure on politicians and pol- icymakers to keep policy tight. However, what matters for fi- nancial markets is not the cur- rent level, but the marginal change in future inflation ex- pectations, because financial markets are forward looking by nature. Some inflation sceptics point out that there is a broad catego- ry of goods and services whose prices are still accelerating. For example, food prices have spiked to new highs, while ser- vice sector and shelter inflation is also sticky. However, grain prices have been falling sharply in recent weeks, and this should lead to a significant drop in food inflation in the coming months. Moreo- ver, while it may take a while for service inflation to come down, the concern over rental inflation should prove unfounded as the US housing market is cooling quickly. The bottom line is that the lat- est CPI report should mark the beginning of a disinflationary process. Based on the premise that the current inflation problem is primarily driven by supply constraints, the outlook for the world economy and markets may not be as bleak as many have feared. In effect, supplier delivery times, order backlogs and the Institute of Supply Management (ISM) price index are all down sharply, while supplier invento- ries are rising in the US. In the meantime, shipping rates have fallen, and Chinese exports have been strong as well. All this suggests that supply-side infla- tion will continue to fall in the coming months. The demand side of the story is more complicated because wage growth is still high and labour productivity has been weak, while the US labour force par- ticipation rate is stuck at very low levels. Nevertheless, with the Fed driving up rates aggressively, aggregate demand will likely soften enough to bring down demand while capping inflation. To be sure, a heightened tug of war between a slowing economy and falling inflation will persist, despite the recent downtick in inflation. While falling inflation is a bull- ish development for both bonds and shares, a recession would entail an earnings decline, which is bearish for equities. Ultimately, we see inflation as the dominant factor in deter- mining asset values or equity prices. This is because inflation drives interest rates, whose im- pact on equity prices is expo- nential. The bond market reaction to the softer inflation report has also been interesting. Short-dat- ed yields have fallen while longer dated ones have risen slightly, amounting to a modest curve steepening for the first time in a long while. By and large, the bond market interprets the preliminary drop in inflation as a pro-cyclical de- velopment because lower infla- tion would imply a less aggres- sive Fed, hence a better chance of a soft economic landing. Finally, a peak in US inflation could mark the first step to- wards an eventual drop in the value of the US dollar. However, it is still too early to see a sustained drop in the dollar as all the major world economies are much too weak. Nonetheless, the dollar looks expensive, and the prospect of any additional hawkish shock from the Fed has diminished. It is only a matter of time be- fore the Fed pauses its tight- ening campaign or cuts rates, but the dollar will sniff this out much earlier. In other words, the turn for the dollar may not be near as the fragile situation of the rest of the world economy should prevent a sharp fall in the greenback. This article was written by Stephen Borg, Head of Private Clients at Calamatta Cuschieri FARSONS SFC ORD SHARES