At the start of every year, global investment banks and research houses issue forecasts on the expected performances of the main benchmark indices in the US, Europe, Asia and also emerging markets. Analysts also highlight the main investment themes likely to dominate financial markets, and the principal sectors that would be likely to outperform.
The Maltese equity market is dominated by six companies which account for over 60 per cent of the overall value of the MSE Equity Price Index. Since most of these companies do not publish financial projections, it is hard to estimate the performance of the index for any calendar year. This is even harder now given the current circumstances and the uncertainty on when COVID-19 vaccines will be successfully rolled out across a large percentage of the global population which would lead to an improved economic outlook. The six largest companies comprising the index are Bank of Valletta plc, Malta International Airport plc, International Hotel I
During the course of 2020, Malta’s corporate bond market was naturally severely impacted by the pandemic. As I highlighted in some articles over the past few months, during the start of the pandemic in early March 2020, there were double-digit declines in the prices of various corporate bonds as a result of the understandable huge concern among retail investors about the unprecedented circumstances that were being experienced.
However, following the sharp sell-off, investor sentiment somewhat improved and many corporate bond prices recovered with some bonds also trading back up above their par value during the second half of the year. On the other hand, though, other bonds still remain below their par value with the clear outlier being Melite Finance plc which last traded at 80 per cent due to the huge negative impact on their business in Italy and the bond restructuring plans which were initially outlined in the 2019 Annual Report published on June 30, 2020.
At the end of every year I like to reflect and assess what the key highlights were, and 2020 has definitely been one to reminisce upon. COVID-19, community spread, confirmed positive cases, contact tracing, epidemic, pandemic, curve flattening, herd immunity, lockdown, quarantine, social distancing, home schooling and working from home are all terminologies we are familiar with and use in our day-to-day talk nowadays.
Moreover, most of these have become key aspects in our daily monitoring as we try to forecast how they are going to affect the markets, without any framework, theories or research to guide us.
During this year, a total value of €58.6 million changed hands in the local equity market, which is 34.3 per cent less than the value during 2019. This level of trading was approximately last seen during 2013 and 2014, and is also less than the 10-year average.