Borza Malta Stock Exchange

In today’s column, stockbroker Paul Bonello breaks down what market corrections are and how they are distinct from the other main form of market downturns.

Paul Bonello has served as managing director of Finco Treasury Management Ltd for the last 30 years, and is a licensed stockbroker and accountant. During his long career, he has served on the boards of several structurally important companies, including Mid-Med Bank, Air Malta, Midi plc, and lectures at the University of Malta.

Paul Bonello by Tyler Calleja Jackson
Paul Bonello / Photo: Tyler Calleja Jackson

He explains:

The term “market correction” is used to distinguish it from the term “bear market” in relation to equity (ordinary share) issues on a stock market.

When an index for a market depreciates by more than 10 per cent from its previous highest point, that is known as a market correction, implying that the market prices are correcting themselves in the face of new events or information affecting risk and return, such as changes in interest rates or economic cycles or political events.

When the market fall exceeds 20 per cent from its previous highest point, the phenomenon is known as bear market. A bear market is naturally much more significant than the milder market correction, and is also of a longer term nature than a market correction.

A bear market typically reflects an economy that has entered into recession, although a recession is determined in a different manner, namely a second subsequent fall in Gross National Product.

An Expert Explains is a BusinessNow.mt initiative to improve economic financial literacy by inviting industry leaders to explain technical terms in a manner that can be understood by a general audience. If you would like to suggest a term or concept for our network of professionals to break down, or if you are an expert willing to contribute to this column, send us a message on our Facebook Page.

Over 500 UK businesses fail to pay close to £16 million in minimum wages to thousands of employees

February 20, 2024
by Fabrizio Tabone

Companies had to pay their debts to staff, together with hefty financial penalties

Approvals for new dwellings in final months of 2023 sinks by 37%

February 20, 2024
by Fabrizio Tabone

San Ġwann, Saint Paul's Bay and Ħamrun registered the highest number of approved new dwellings during the period

Road accidents in 2023 amounted to €64.8 million in insurance claims

February 20, 2024
by Anthea Cachia

Despite the increase in road traffic accidents, insurance claims decreased when compared to 2022