World capital markets, new emerging investment opportunities in focus
“Agriculture, oil refining, nuclear power and shipping may be just a few of the areas that may experience potential growth in the coming years,” explains David Marchant, Head of International Equities at Insight Investment while addressing Valletta Fund Management’s recently-held first Business Breakfast for 2005.
Addressing officials from Valletta Fund Management, Bank of Valletta and a number of investment advisors and intermediaries at the Hilton Malta, Mr Marchant gave an overview of the international equity and bond markets’ performance throughout 2004 and an outlook on their expected performance throughout 2005.
“The first six months of 2004 saw no growth in the world’s major markets and this contrasted sharply with the steady recovery experienced in the second half of the same year. In the first half concerns with regards US growth loomed and this led to a more cautious investor sentiment. This, coupled with the level of oil prices that reached record highs lead to inflationary concerns in certain economies,” added Mr Marchant.
“Interest rates stand at very low levels and bond yields have decreased as well. Equities therefore need modest capital appreciation in order for returns to reach the yield levels of bonds,” added Mr Marchant. “World economies are currently going through a moderate growth period, more of an adjustment period post the 2000 bubble. Notwithstanding that, the performance of European equities prevails over US equities, the market still has too many imbalances. Within this scenario, investors should keep an eye on sectors such as those involved in oil refining, oil and gas exploration, metal smelting and other sectors which seem to have suffered from underinvestment in the past and are now witnessing higher returns” concluded Mr Marchant.
The b1reakfast was also addressed by Alex Illingworth, Director of Global Equities at Insight Investment who reviewed the domestic market throughout 2004 and gave a brief outlook on 2005. In his presentation, Mr Illingworth referred to the way investors, during 2004, have been attracted to the equity market following improvements in the financial results of most companies coupled with increased dividend payouts as well as encouraging developments in relation to the sale of state owned shareholdings in listed companies. “Strong fundamentals and generally undemanding valuations have fostered a very active participation in the equity markets evidenced by increasingly higher trading activity. Of particular interest is the news related to corporate developments in the light of Government’s decision to sell its shareholding in Maltacom, Bank of Valletta and Malta International Airport. On the other hand, the small cap companies are experiencing improving fundamentals and are in some instances cheaper than larger peers.”
Referring to the bond market, Mr Illingworth added “in the bond market prices failed to emulate the remarkable performance of 2002 and 2003 when they had adjusted upwards to reflect lower yields prevalent in the Euro area. Earlier in 2004, growth and inflation expectations in the UK and in the US led to their respective capital markets trading up yields in anticipation of a reversal of their respective central banks’ monetary policy, thus causing the premium on the Maltese Lira to narrow to unprecedented lows. Basically diversification is more key than ever and this can be achieved through balanced investments, that is achieved through investments in cash bonds and also equities,” concluded Mr Illingworth.
The Business Breakfast was concluded by Kenneth Farrugia, who officially announced his appointment as General Manager of Valletta Fund Management in succession to Charles Borg. In his brief address, Mr Farrugia reiterated Valletta Fund Management’s mission to be at the forefront of the local investment service industry. “The hosting of these periodic breakfast meetings forms part of the Company’s continuous efforts to deliver value added to financial services operators wherein the sector is kept updated with the most recent developments in the local and foreign markets. Valletta Fund Management was the first fund management company to be set up in Malta and over the last ten years has rapidly grown to become a leader in its sector as a result of the continuous support it has received from its distribution network and independent financial intermediaries. The Company has introduced on the market a wide range of products, which have generally delivered very competitive long-term returns for investors thanks to the professional investment management provided by Insight Investment, VFM’s investment advisors.”