The month of April

During the first week of April, global equity markets experienced a very severe downturn. From 1st April, the day before what President Trump referred to as Liberation Day in view of the imposition of a new tariff policy, until 8th April, the S&P 500 index in the US and the Nasdaq plunged by 11.2 per cent and 11.7 per cent respectively. These indices are now down 19 per cent and 24.4 per cent from their respective record highs on 19th February 2025 and 16th December 2024. All other share indices across the world followed the same pattern in response to the announcement of the higher-than-expected increase in tariffs being imposed by the US on a wide range of countries.

However, in view of the very fluid situation and the speed the trade war is unfolding, I will not be writing about the stock market meltdown this week, but instead I will focus on what the month of April means for the local capital market.

Over the next three weeks, there will be a large number of announcements by companies listed on the Malta Stock Exchange since the end of April is the deadline for the publication of annual financial statements for both equity and bond issuers that have a financial year ending in December. While a number of companies whose shares are listed on the MSE have already issued their annual report, commencing with HSBC Bank Malta plc on 19 February, there are numerous others who will be publishing their financial statements as from this week.

Meanwhile, a number of companies have only recently announced to the market via the obligatory company announcement the date of publication of their annual report while some others have not yet published the date of approval. It is hard to believe that such companies do not have a date confirmed to adhere to such an important deadline. This calls into question yet again the manner in which several companies fail to adhere to proper communications to all stakeholders. For this reason, it would be worth highlighting once again the effectiveness of having a corporate calendar published at the start of the year to provide visibility on the timing of all statutory announcements. This is very common practice across the larger capital markets overseas and would not take too much effort for local companies to follow accordingly.

Given the timing of such announcements during the start of the second quarter of the year, it would be interesting to note which companies also provide an update on the current financial year as opposed to simply providing commentary on the past financial year to which the annual financial statements refer to. Given the very recent developments internationally which may lead to a recessionary environment in various parts of the world, it would also be topical for the directors of the respective companies to highlight any possible impact from the evolving trade war. Moreover, following the recent company announcement by Bank of Valletta plc which included guidance on expected profitability in 2025 and indications of trends over the coming three years, it would also be important to understand which companies follow in the same vein and also begin to provide this important information to the market.

Incidentally, in view of the timeline when most companies publish their annual financial statements towards the end of April, some of the other companies would also be updating the market on their performance during the first quarter of the new financial year. In fact, last year, both APS Bank plc and HSBC Bank Malta plc had published such an announcement by the end of April with Bank of Valletta plc and Malta International Airport plc following during the first half of May. While this is not an obligatory announcement, these companies have thankfully started to replicate the typical corporate calendar followed by most companies listed on larger international stock exchanges.

With respect to the upcoming announcements by the large majority of bond issuers in Malta, the investing public must distinguish between those operating companies that issued the bond and are themselves the operating companies to those companies acting as a special purpose financing vehicle and have a related company acting as a guarantor. While the presence of a guarantor may continue to provide a false sense of security to a certain cohort of retail investors in view of the ‘guaranteed’ terminology used, an analysis of the financial statements of the guarantors are those that are indeed meaningful to focus on. In view of the obligations for issuers and/or guarantors to publish their financial forecasts via a Financial Analysis Summary on an annual basis, it would be important for investors to draw a comparison between the actual results for 2024 and the forecasts provided last year.

In the next two months, once updated forecasts are published through the Financial Analysis Summary, investors should review these in detail to assess once again the strength of the issuer or guarantor. Particular attention should be given to those companies that possess weaker financial metrics to gauge whether their financial performance and outlook has indeed improved, thereby reassuring the market that they can continue to honour their financial obligations, especially those companies whose bonds are up for maturity within the next 18 months for example. Invariably, there will be a number of companies that would continue to be of concern and investors should utilise this important financial information to remain vigilant when repositioning their investment portfolios. A strategy of positively considering those issuers offering the highest interest rate is surely not the best approach if one takes into consideration the risk vs reward perspective.

The month of April is also the start of the Annual General Meeting (AGM) season. In the coming weeks, companies will be announcing the agenda items for discussion at these shareholder meetings and providing the necessary documentation ahead of the meetings. The meetings scheduled by APS Bank plc and HSBC Bank Malta plc on 8th May and 13th May respectively will surely attract a lot of interest from the investing community as well as the local journalists to understand any further updates with respect to the potential sale of the majority stake in HSBC Malta. Meanwhile, the documentation to be published in the coming weeks by Malta International Airport plc and Bank of Valletta plc ahead of their AGMs on 14th May and 29th May will be of particular interest in view of the very important initiatives being taken on their share buyback programmes.

Developments across the local and international capital markets over the next few weeks should prove to be particularly interesting from various aspects. Companies are urged to provide as much information as possible on their current financial performance while shareholders attending AGMs should utilise their time wisely to field relevant questions on business strategy and shareholder returns.

This is indeed best practice from an investor relations perspective to ensure regular updates to the investment community and all other stakeholders. In fact, the first-quarter earnings season in the US commenced this week and a number of banks including JPMorgan Chase, Morgan Stanley and Wells Fargo are all scheduled to report tomorrow. These announcements and the virtual analyst meetings that follow on the same day immediately after the results publication come at a very important time with most analysts bound to ask questions related to the impact of tariffs on the US economic performance and the financial sector in particular.

Read more of Mr Rizzo’s insights at Rizzo Farrugia (Stockbrokers).

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