Issue link: https://maltatoday.uberflip.com/i/558086
maltatoday, WEDNESDAY, 19 AUGUST 2015 12 Business Today Regular market closed – 18/08/2015 Symbol Code Volume Traded Value Traded Trades High Price Low Price Open Price Close Price Change s BOV 36,000 82,774.200 9 2.300 2.285 2.299 2.285 0.005 s GO 6,350 22,698.600 4 3.580 3.570 3.570 3.580 0.010 t HSB 17,753 32,000.600 9 1.820 1.800 1.820 1.800 -0.030 t IHI 9,500 7,582.000 2 0.800 0.791 0.800 0.791 -0.009 l LOM 3,153 6,668.600 1 2.115 2.115 2.115 2.115 0.000 l MDS 1,850 4,329.000 1 2.340 2.340 2.340 2.340 0.000 t MIA 5,300 20,643.500 2 3.895 3.895 3.895 3.895 -0.005 s RS2 35,000 77,771.620 7 2.250 2.194 2.194 2.250 0.056 l SFC 395 2,073.750 1 5.250 5.250 5.250 5.250 0.000 t G15F 100,000 101,070.000 1 101.070 101.070 101.070 101.070 -0.020 t G16A 6,989 7,265.070 1 103.950 103.950 103.950 103.950 -0.050 t G16B 4,787 5,075.180 2 106.020 106.020 106.020 106.020 -0.120 t G18A 20,966 25,563.850 2 121.930 121.930 121.930 121.930 -0.090 l G20A 1,048 1,273.010 1 121.470 121.470 121.470 121.470 0.000 s G21A 37,249 46,133.820 3 123.860 123.830 123.830 123.860 0.080 t G22A 11,181 14,186.450 1 126.880 126.880 126.880 126.880 -0.320 s G22B 500 604.900 1 120.980 120.980 120.980 120.980 0.030 t G23A 23,000 30,341.600 1 131.920 131.920 131.920 131.920 -0.370 s G28B 10,000 12,978.000 1 129.780 129.780 129.780 129.780 0.220 l G29B 30,000 31,350.000 1 104.500 104.500 104.500 104.500 0.000 s G30A 5,000 7,004.000 1 140.080 140.080 140.080 140.080 0.450 s G31A 5,000 7,031.000 1 140.620 140.620 140.620 140.620 0.630 s G32A 100,000 133,740.000 1 133.740 133.740 133.740 133.740 0.480 s G32B 100,000 130,990.000 1 130.990 130.990 130.990 130.990 0.450 s G33A 122,000 158,050.000 2 129.670 129.000 129.000 129.670 0.440 s G34A 98,000 125,302.800 4 127.860 127.860 127.860 127.860 0.240 s G40A 126,200 138,248.150 9 109.630 109.200 109.200 109.580 0.380 t 6PM25 445,000 484,850.000 5 109.000 108.900 109.000 108.900 -0.110 t HB17A 2,330 2,434.850 1 104.500 104.500 104.500 104.500 -0.200 s IG19A 2,500 2,648.750 1 105.950 105.950 105.950 105.950 0.950 t IH21A 7,000 7,623.000 1 108.900 108.900 108.900 108.900 -0.100 t IH23A 10,000 11,200.000 1 112.000 112.000 112.000 112.000 -0.500 l IH25A 800 888.000 1 111.000 111.000 111.000 111.000 0.000 s MI17A 500 530.000 1 106.000 106.000 106.000 106.000 4.000 s MI21A 65,000 65,650.000 3 101.000 101.000 101.000 101.000 0.010 t MS23A 2,000 2,198.000 1 109.900 109.900 109.900 109.900 -0.120 Market Summary as at August 18, 2015 Equity Official List Session State ................................................................... closed Number of trades ............................................................. 85 Volume Traded ................................................................. 1,452,351 Value of € denominated securities .................................... 1,810,772.300 Value of US$ denominated securities ................................ 0.000 Value of GBP£ denominated securities .............................. 0.000 Current Index ................................................................... 4,219.743 Previous Index ................................................................. 4,229.142 Change in Index (%) ......................................................... -0.222% 6pm Holdings plc .......................... 0.759 0.00% Malta International Airport plc ....... 3.895 -0.13% Bank of Valletta plc ........................ 2.285 0.22% MaltaPost plc ................................. 1.620 0.00% FIMBank plc .................................. 0.450 0.00% Medserv plc .................................. 2.340 0.00% GlobalCapital plc ........................... 0.800 0.00% Mapfre Middlesea plc .................... 2.200 0.00% GO plc ........................................... 3.580 0.28% MIDI plc ........................................ 0.340 0.00% Grand Harbour Marina plc ............. 0.945 0.00% Plaza Centres plc ........................... 0.960 0.00% HSBC Bank Malta plc ..................... 1.800 -1.64% RS2 Software plc............................ 2.250 2.55% International Hotel Investments plc 0.791 -1.13% Simonds Farsons Cisk plc ............... 5.250 0.00% Island Hotels Group Holdings plc ... 1.101 0.00% Tigné Mall plc ................................ 0.855 0.00% Lombard Bank Malta plc ................ 2.115 0.00% Pefaco International plc ................. 2.190 0.00% Malita Investments plc ................... 0.936 0.00% Santumas Shareholdings plc ......... 2.000 0.00% MSE Index Global economic outlook remains positive With both the United States and Unit- ed Kingdom economies set firmly in a recovery phase, and the eurozone now also beginning to see some traction in GDP growth, Kames Capital takes a positive view on the global economy. "Expansion in the US and the UK is progressing well. Countries in the eurozone, including Ireland, Spain and Portugal, are all reporting positive GDP growth. Italy appears to have moved out of its trough – no longer reporting negative GDP growth – and Greece, despite its troubles, is too small to make a difference to the direction of the overall European economy," Stephen Baines, Investment Manager in the Global High Yield Bond Fund team at Kames Capital, said. The table shows the projected direction of interest rates over the next decade. "The market is expecting the US and the UK to enter an interest rate-hiking cycle over the next couple of years. Nothing drastic is expected to happen in the next few years, with the hike in interest rates being a sign that the economy is recovering," Baines said. The long-term rate at which interest rates will peak, projected at between 2% and 3%, is going to be much lower than we saw in previous cycles, says Baines: "Though it is levelling off and, given that we are in an interest rate hiking cycle, we believe that government bonds in general are over priced, with their yields not generous enough to reflect the risk that levels of GDP growth and inflation return to levels that have been seen throughout the 20th century. "Also, we don't think that government bonds are sufficiently priced for the levels of inflation and GDP growth that we see today. On balance, returns from government bonds are probably going to be around 0 over the next six months, so your yield could well be wiped out by capital depreciation on the other side." Kames Capital is arguing that investors should have low exposure to government bonds in terms of their duration positioning, focusing more on shorter-term maturities. Investment- grade corporate bonds are preferred, although their returns are correlated with government bonds. "Credit spreads, in general, are still at levels that we think are attractive enough to compensate for default risk and, indeed, within financials – banks and insurance companies – we think that credit spreads are still quite generous. So they don't properly take into account the deleveraging and derisking that we have seen in those institutions since the credit crisis," Baines said. Improvements in major economies over the next few years will mean low levels of default in high yield bonds. "This means investors will be able to earn a coupon or a yield-like return. So with yields – certainly on our fund – of around 4.5%, we think that is a reasonable guide as to what returns could be going forward." Emerging markets are probably the least certain part of the global fixed income markets, with Kames forecasting possible returns from -2% to +5%. Baines pointed out that these types of bonds have previously been negatively impacted every time the US has increased interest rates. "Given, we believe, that the US is entering a rate-hiking cycle, we will be cautious on emerging markets," he said. The current commodity downcycle may challenge fiscal positions in many emerging market countries. Valuations, too, of emerging market bonds are at tighter-than-average levels vs history. "So we don't think that is likely to be the most attractive place to invest," he added. Credit spreads vs US Treasury bonds were at relatively tight levels. "So, not only are the fundamentals deteriorating slightly, but you will be buying into emerging markets with tighter-than-average valuations. Note that the forecast range is quite wide in emerging markets, compared to some asset classes which is a function of the higher level of volatility that we can expect in the wider range of outcomes." Although nominal bond yields are at 4%-4.5%, Baines points out that we currently live in an inflation environment of almost zero for consumer price inflation. "So you receive all of your yield – or almost all – in real terms. It does not get eaten away by inflation. That is your main risk when investing in government bonds because you do not expect the UK, US or Maltese government to ever go bust. "It is just the value of the currency that you receive at the time of maturity. So part of your bond yield is to compensate you for inflation risk." Another factor is the supply and demand for funds. As demographics have changed over the past 20-30 years, the baby boom generation born after World War II, who needed funds to buy housing, cars or to invest in companies that provided the goods they demanded for their lifestyles, are today reaching retirement with huge pots of savings. They want to invest these in bonds that provide a low-risk haven. "At the moment there is a high supply of funds and a low demand to borrow funds," Baines observed. Still the global economic outlook remains positive, although more negative for government bonds as central banks are gradually going to come under pressure to raise interest rates to stave off the threat of inflation developing as the labour market supply diminishes. "That environment of a continual expansion over the next few years should provide a very good backdrop for lending to high yield corporations seeking to borrow because we think that will lead to a low default backdrop. So a low level of defaults from high yield borrowers should mean that investors in high yield bonds are able to capture a large proportion of the credit risk premium." The information in this article is based on Kames Capital's understanding of the current and historical positions of the markets. The views expressed should not be interpreted as recommendations or advice. A low interest rate scenario Global business performance indicators