Issue link: https://maltatoday.uberflip.com/i/561386
maltatoday, WEDNESDAY, 26 AUGUST 2015 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way Money Market Report for the week ending August 21, 2015 ECB Monetary Operations On Monday, August 17, the Europe- an Central Bank (ECB) announced its weekly main refi nancing opera- tion (MRO). The auction was con- ducted on Tuesday, August 18, and attracted bids from euro area eligi- ble counterparties of €69.56 bil- lion, €0.11 billion lower than the bid amount of the previous week. The amount was allotted in full at a fi xed rate equivalent to the prevail- ing MRO rate of 0.05%, in accord- ance with current ECB policy. On Wednesday, August 19, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $0.13 billion, which was allotted in full at a fixed rate of 0.63%. Domestic Treasury Bill Market In the domestic primary market for Treasury bills, the Treasury invited tenders for 90-day bills maturing on November 19, 2015. Bids of €28.00 million were sub- mitted, with the Treasury accept- ing €10.00 million. Since €11.00 million worth of bills matured dur- ing the week, the outstanding bal- ance of Treasury bills decreased by €1.00 million, to stand at €245.05 million. The yield from the 90-day bill auction was -0.038%, up by 1.0 basis point from bids with a similar tenor issued on August 14, 2015, representing a bid price of 100.0095 per 100 nominal. During the week under review, there was no trading on the Malta Stock Exchange. On Tuesday the Treasury invited tenders for 90-day bills and 181- day bills maturing on November 26, 2015, and February 25, 2016, respectively. Market commentary: US Stock market: the plunge, the rebound and the fear of a new correction After a rather volatile week that witnessed a steady decline in stocks and corporate bond pric- es, along with sizable swings in the currency market, investors were met on Monday by one of the worst trading days on record since the 2000 and 2008 fi nancial crashes. Although many market participants spent the weekend adjusting their investment strategies following the sharp decline in the European and US equity markets, which burned through billions in market capitalization by dropping several percentage points over the last two days of last week, I bet few investors were actually ready for a US market opening as ugly as the one seen on Monday. While the European markets traded heavily in the red throughout the entire session, with most of the major indexes dipping over 5% before slightly recovering in the last part of the trading day, it was the US that took traders by surprise. US equity futures pointed to a very weak opening, however, a wave of panic sell orders pushed the DJIA to open over 1,000 points lower, while several small and large stocks plunged as much as 15% in matter of minutes. In early trading, popular names led the major indexes down: Facebook opened below $75 a share, 13% lower than Friday's closing; Apple plunged to $94.25 a shares, around 11% down from its previous closing price; Starbucks dropped over 17%, opening at $43.73 per share and AT&T, usually considered a low volatility name, lost 5.5% within minutes from the beginning of trading. The unwinding of long positions, following the execution of stop loss orders triggered by the plunging prices created a snowball effect on the market, adding selling pressure onto already abnormally volatile equities, spreading a panic selloff started last week. The steep drops across the board made good stocks become too cheap to be avoided and, as stop loss orders were pushing prices down, some of the money buy orders suddenly found themselves being executed on the open market, fuelling an immediate rebound that pushed equity indexes to pair a large share of their initial loses within the first half hour of trading. Stocks that opened over 10% lower turned flat by the end of the US morning session, closing just a few percentage points down on the day. Apple paired all its losses before closing 2.5% lower, Gilead Science, the largest biotech stock on the market, turned positive before closing 4.44% down, while the S&P 500, which opened 4.46% lower in New York, paired most of the initial losses by mid-day, before dropping another 77.68 points, closing 3.94% lower. The wild ride of the equity markets on Monday, that pushed the S&P 500 into correction territory, costed the Dow Jones Industrial Average 3.57% and caused the European markets to experience their worst trading day since 2008; this contributed to prompt the Chinese Central Bank to act, overnight, in support of the country's currency by injecting the equivalent of $23.4 billion in new money. The latest intervention, while still to prove its efficiency, has lifted the confidence of traders, which following three straight days of heavy losses, returned to the equity markets as buyers, fuelling a rally in European markets which yesterday were posting gains exceeding 3% across the board. Disclaimer: This article was issued by Paolo Zonno, Trader/Analyst at Calamatta Cuschieri. For more information visit, www.cc.com. mt. The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing in this article. Foreign direct investment up by €8.2 billion last year The stock position of foreign direct investment in Malta stood at €141.9 million as of the end of December 2014, a registered €8.2 billion over the corresponding month in 2013. National statistics show that €139.1 billion originated from financial and insurance activities, accounting for 98% of all foreign direct investment in Malta. There was a net increase of €7.0 billion in FDI flows during 2014, compared to an increase of €7.4 billion during 2013. Increases in claims on direct investors were the main contributors to this increase, with decreases in equity capital having a mitigating effect. During 2014, direct investment abroad increased by €1.8 billion, compared to an increase of €2.0 billion during the previous year. This was mainly the result of increases in claims on direct investors of €2.3 billion. In terms of stock position, in December 2014 direct investment abroad by resident entities was estimated at €36.7 billion. Government says financial and insurance activities are main drivers of FDI increase The government has welcomed the latest NSO figures showing that FDI in Malta has increased by 14.4 billion in the last two years, claiming financial and insurance activities were the main driver of the increase. "Of particular note is the fact that investment in manufacturing registered a marked increase of €38 million in 2014 following a notable increase of €101 million in 2013. This contrasts with a fall of €78 million in 2012," the statement reads. Finance minister Edward Scicluna said that the strong inflow of FDI is "one of the most important indicators of the confidence that foreign investors have in the prospects of our economy". "This is the result of Government's efforts to ensure fiscal sustainability, creating the right macroeconomic conditions while pro-actively seeking investment in new growth sectors," he said.