Today’s article is my 700th media contribution on financial matters. When I wrote my first article in May 2007, it was inconceivable that I would reach such a milestone.

Initially, the main focus of my articles was to help improve investor education in Malta. While the task of writing on a weekly basis for the past 14 years has been rather difficult, the obvious need for me to fill the void in financial awareness has continued to give me the rush to do so. Indeed, much effort still needs to be made by the various stakeholders to enable the retail investment community to better understand these important issues.

My articles over the past 14 years have very often looked at the performance and financial trends of a number of issuers of stocks and bonds listed on the Malta Stock Exchange. Given the ‘domestic bias’ favored by many retail investors after MSE trading began in the early 1990s, coupled with the lack of proper financial journalism in the Maltese media, I felt it was important to devote time and energy to highlighting important trends in a number of companies listed on the MSE.

In addition, the growth of the corporate equity and bond market over the years has required coverage of a much broader spectrum of the local investment universe.

As reported last week, the size of the Maltese corporate bond market has grown significantly from € 486 million in 2007 to the current value of € 1.91 billion. Naturally, many investors do not have the in-depth knowledge or time to delve into a company’s financial statements in detail to assess the financial strength of a company issuing financial instruments. Hopefully my contributions over the years have helped raise awareness in the investment community, also through the introduction of key financial ratios that should be monitored to periodically assess financial strength, leverage and overall creditworthiness. from a company.

In order to publish the required analysis of a company’s financial statements for the benefit of the investing public, the regular dissemination of information by the various issuers of stocks and bonds is of fundamental importance. Although until a few years ago the scrutiny of financial analysts may not have been welcomed by some issuers as most were unwilling to provide adequate information, the role of the financial analyst has become more popular. In addition, the level of information to be published by issuers of shares and bonds has also increased significantly over the years. It has also helped to provide more transparent and timely information to the investing public.

While some of my contributions have also gone to a number of larger companies in the United States (primarily the tech giants that have dominated global stock markets in recent years), it’s also fair to say that ” given the large number of articles widely available across the internet covering financial developments taking place abroad, contributions from renowned international financial commentators are best placed to provide the required analysis and information on these companies .

Given the current interest rate scenario, it is important for investors to hold a diversified portfolio of assets

The two major shocks to the global economy over the past 14 years, namely the international financial crisis in 2008/09 and the significant impact of the COVID-19 pandemic in early 2020, have undoubtedly left an impact marked on investor sentiment. Given the continuing nature of the pandemic and the economic repercussions that are still very evident today, investors continue to face undeniable uncertainty about the pace of the post-COVID economy. A number of my articles written in the aftermath of the global financial crisis in 2008/09 and also over the past year have covered these major shocks and the importance for investors of having a long-term investment horizon. when building and adjusting their investment portfolios over time. .

In order to help improve investor education, several articles have covered general topics on investor philosophy and the mindset that should be adopted by investors of various ages and with goals. different. For example, an article I published in October 2012 titled “Lifestyling an investment portfolio,” in which I discussed a general rule advocated by some academics that bond allocation in an investment portfolio should generally be equal to the investor’s age, remains very relevant today.

I had also written an article in February 2013 on the importance of “cost averaging”, which could have been very useful for investors over the past year, as the stock markets initially fell due to of the pandemic. The strong rally in US and European equities from the March 2020 lows continues to bolster the view held by most commentators and long-term investors who manage to be “greedy when others are scared.”

The very low interest rate environment which has dominated the investment world over the past decade is certainly one of the major challenges still facing many Maltese retail investors. Over the past few weeks, I have delved into this topic by publishing an article on “Investing for Retirement” and another on “The Role of the Capital Market”.

Given the current interest rate scenario, it is important for investors to hold a diversified portfolio of assets to generate additional income stream and not to keep excess funds unused in bank deposits. In recent years, a number of investment opportunities have been offered by existing and new issuers in the capital market. These have enabled investors to build a more diversified portfolio. This trend is expected to continue in the coming months given the reported interest from new and existing issuers keen to tap the Maltese capital market.

While the bond market has grown steadily over the past 10 years, the success of the equity market has been less pronounced although the share offerings of PG plc (in the first half of 2017) and BMIT Technologies plc (beginning 2019) were among the largest IPOs ever.

It is fair to say that the Maltese capital market can still be considered relatively young since its inception in 1991. However, most agree that the rate of growth in the number of share listings has indeed been disappointing. The culture of fairness in Malta is still not as widespread as it should be given the scale of development of the Maltese economy over the years. Indeed, the local stock market can still be seen as a ‘frontier’ market compared to other markets in the world, as there is still a general tendency among many Maltese companies to avoid the use of the stock market.

The successful offerings of PG plc and BMIT Technologies plc over the past four years should have encouraged other companies to understand the long-term benefits of a public listing, even considering the tax-efficient method for incumbent shareholders. Indeed, following the new measures introduced via Budget 2017, the sale of shares to the public via a listing on the MSE is not subject to capital gains tax. This could represent a significant saving for the shareholders of companies of a certain size, especially compared to a sale (not by quotation on the stock market), which would then attract the tax on the capital gain realized by each of the shareholders.

In addition, a listing creates an accessible and transparent market for a company’s shares. This is an important consideration, especially for family businesses which, over several generations, would have seen their individual family shareholding increase to include many people who are not directly involved in the management of the business and would like a own exit route for some or all of the shareholders. In other cases, the equity market also serves as a catalyst for capital restructuring or as a platform for the creation of shareholder value, especially when it comes to M&A activities or acquisitions. ‘expansion opportunities.

Thus, all capital market stakeholders should take a more proactive approach to explaining the benefits of using capital markets which, invariably, in the long run, far outweigh costs, regulatory obligations and public oversight.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “Rizzo Farrugia”, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It was not disclosed to the named company (ies) prior to publication. It is based only on public information and is published for informational purposes only and should not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and others concerned may not trade in the securities to which this report relates (other than the execution of unsolicited client orders) until the recipients of this report have had a reasonable opportunity to act on it. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, hold interests in the securities mentioned herein and may at any time make purchases and / or sales therein. as principal or agent, and may also have other business relationships with the company (s). Equity markets are volatile and subject to fluctuations which cannot be reasonably foreseen. A previous performance is not necessarily indicative of future results. Neither Rizzo Farrugia, nor any of its directors or employees accept any responsibility for any loss or damage resulting from the use of all or part of it and no representation or warranty is given with respect to reliability. of the information contained in this report.

© 2021 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.