Registration schemes feed local investment
Despite the difficult economic climate, the local trend that sees every bond and equity issued in Malta oversubscribed remains. Treasury bills, worth much larger sums of money, continue to be taken up - increasingly by individuals on the retail market,...
Despite the difficult economic climate, the local trend that sees every bond and equity issued in Malta oversubscribed remains. Treasury bills, worth much larger sums of money, continue to be taken up - increasingly by individuals on the retail market, not by the tradition institutional investors like banks.
"Most of the money going into these investments comes from other investments - people who had investments which have matured and need somewhere else to put them, or who have decided to move their money out of another investment," Jesmond Mizzi, managing director of Jesmond Mizzi Financial Services, says.
The money may not have been in Malta to start off with. Joe Bonello, managing director of Financial Planning Services Ltd, points out that this is an indication of the success of the three registration schemes for funds held by Maltese citizens overseas.
"They were not repatriation schemes, even if they are sometimes spoken of this way," he says. "Many people in fact took the opportunity to register their financial assets held abroad, but then kept them outside the island."
With the state of the financial markets outside Malta, Mr Bonello believes a good number of people would see a compelling logic to bringing their assets and putting them into the Malta Stock Exchange.
From the beginning of 2008 to mid-January, there were four new bond issues which raised a total of €102 million. The latest, issued by Midi plc, raised €40 million in the second week of this year. The three companies selling equity to the public, MaltaPost and two IT companies, Crimsonwing and 6pm, were chasing smaller amounts: in all, they raised the equivalent of just under €14 million between them, 6pm in sterling.
These sums are dwarfed by the money flowing into government-issued treasury bills. But the issues all share one thing in common: most offers close within one or two hours of opening, and the ones that were not immediately snapped up only stayed open till the evening of the first day.
The background to at least some of this fast uptake is easy to see. The 6.75 per cent United Finance Bonds 2014 - 2016, issued in July 2008, coincided with maturity of the 6.75 per cent United Finance Bonds 2008, for example. At least some of the people who lent money to the United Group in the earlier issue were happy enough with the group to finance it again.
The new issue was for €10 million, increased to €12 million after the overallotment option of €2 million was taken up. This was substantially more than the value maturing.
Maltese bonds are, at present, very attractive propositions. The returns they offer - 7.5 per cent on the Mediterranean Investment Holdings bond, seven per cent on MIDI's paper, 6.75 per cent for the United Finance issue and 5.9 per cent on HSBC's Subordinated Bond - are good, and prices have been holding up well as bond markets outside Malta have dropped sharply.
"The Maltese tend to hold their bonds to maturity," Mr Bonello says. "But they do trade them, even if in low volumes."
The implication is clear: the Maltese bond market is not the most liquid there is, but it does reflect the value of the investments listed with the Malta Stock Exchange.
Treasury bills are also drawing ever greater attention from the general public. "More of the
Treasury bill issues are being sold through the retail market," Mr Mizzi points out. "People call us with instructions to buy for every issue." He attributes this to two factors: in the current climate, the return on the treasury bills means that people who would not have invested in the money markets are now looking on them more favourably, and secondly, the simplification of the buying process.
"Now all people need to do to buy a treasury bill is instruct us to do so," Mr Mizzi says.
Mr Bonello points out that the registration schemes for assets held outside Malta led to some €1.2 billion being declared. Some of this money was repatriated immediately and invested in property or on the Malta Stock Exchange. But not all of it. Once it was legally declared, many people left their assets where they were.
This is quite likely the source of at least part of the funds that flood every new issue in Malta, Mr Bonello suggests, adding that Midi's euro/sterling offer was a wise decision. With current exchange rates, the dual denomination removes at least some of the pain involved in bring money from the UK into the eurozone - making this money available to finance Maltese businesses.
"Most of the money going into these investments comes from other investments - people who had investments which have matured and need somewhere else to put them, or who have decided to move their money out of another investment," Jesmond Mizzi, managing director of Jesmond Mizzi Financial Services, says.
The money may not have been in Malta to start off with. Joe Bonello, managing director of Financial Planning Services Ltd, points out that this is an indication of the success of the three registration schemes for funds held by Maltese citizens overseas.
"They were not repatriation schemes, even if they are sometimes spoken of this way," he says. "Many people in fact took the opportunity to register their financial assets held abroad, but then kept them outside the island."
With the state of the financial markets outside Malta, Mr Bonello believes a good number of people would see a compelling logic to bringing their assets and putting them into the Malta Stock Exchange.
From the beginning of 2008 to mid-January, there were four new bond issues which raised a total of €102 million. The latest, issued by Midi plc, raised €40 million in the second week of this year. The three companies selling equity to the public, MaltaPost and two IT companies, Crimsonwing and 6pm, were chasing smaller amounts: in all, they raised the equivalent of just under €14 million between them, 6pm in sterling.
These sums are dwarfed by the money flowing into government-issued treasury bills. But the issues all share one thing in common: most offers close within one or two hours of opening, and the ones that were not immediately snapped up only stayed open till the evening of the first day.
The background to at least some of this fast uptake is easy to see. The 6.75 per cent United Finance Bonds 2014 - 2016, issued in July 2008, coincided with maturity of the 6.75 per cent United Finance Bonds 2008, for example. At least some of the people who lent money to the United Group in the earlier issue were happy enough with the group to finance it again.
The new issue was for €10 million, increased to €12 million after the overallotment option of €2 million was taken up. This was substantially more than the value maturing.
Maltese bonds are, at present, very attractive propositions. The returns they offer - 7.5 per cent on the Mediterranean Investment Holdings bond, seven per cent on MIDI's paper, 6.75 per cent for the United Finance issue and 5.9 per cent on HSBC's Subordinated Bond - are good, and prices have been holding up well as bond markets outside Malta have dropped sharply.
"The Maltese tend to hold their bonds to maturity," Mr Bonello says. "But they do trade them, even if in low volumes."
The implication is clear: the Maltese bond market is not the most liquid there is, but it does reflect the value of the investments listed with the Malta Stock Exchange.
Treasury bills are also drawing ever greater attention from the general public. "More of the
Treasury bill issues are being sold through the retail market," Mr Mizzi points out. "People call us with instructions to buy for every issue." He attributes this to two factors: in the current climate, the return on the treasury bills means that people who would not have invested in the money markets are now looking on them more favourably, and secondly, the simplification of the buying process.
"Now all people need to do to buy a treasury bill is instruct us to do so," Mr Mizzi says.
Mr Bonello points out that the registration schemes for assets held outside Malta led to some €1.2 billion being declared. Some of this money was repatriated immediately and invested in property or on the Malta Stock Exchange. But not all of it. Once it was legally declared, many people left their assets where they were.
This is quite likely the source of at least part of the funds that flood every new issue in Malta, Mr Bonello suggests, adding that Midi's euro/sterling offer was a wise decision. With current exchange rates, the dual denomination removes at least some of the pain involved in bring money from the UK into the eurozone - making this money available to finance Maltese businesses.