€200 million has been raised through new corporate bond offerings on the primary market in the first six months of this year, according to Edward Rizzo, a director of Rizzo, Farrugia & Co. (Stockbrokers) Ltd.
Writing his weekly stock market review in today's The Times Business, Mr Rizzo said the past six months have undoubtedly been the busiest period for the primary market - the market for new long-term capital - since the launch of the Malta Stock Exchange in 1992.
Mr Rizzo says the €200 million includes the latest successful issues by International Hotel Investments plc and Tumas Investments plc which attracted strong demand from investors. "Although these two bonds were launched concurrently with a large Malta Government Stock issue and very shortly after the €50 million Bank of Valletta bond, substantial demand for the IHI and Tumas bonds was again very evident," he said.
"With so many investors now participating in the primary market, the importance of liquidity in the secondary market has become an urgent matter. Unless this vital issue is resolved within a very short timeframe, it is likely that this new additional source of funding for companies will encounter difficulties at some point in time.
"Investors simply need to be able to sell any bonds should they require to do so before redemption date and this can only be possible if 'market makers' are allowed to officially operate in the market.
"On the other hand, investors who missed out at the public offering stage of a bond should be able to buy some in the secondary market from a 'market maker'. This is an important ingredient for a liquid secondary market.
"In my view, this is one of the most crucial aspects necessary to allow the local stockmarket to grow and contribute to Malta's economy. Given the new issues lined up to tap the market before year-end (both through corporate bonds as well as equity issues) the official introduction of 'market makers' must happen soonest," Mr Rizzo said.
Mr Rizzo said that with investors shifting their focus to the new corporate bond offerings in the primary market, it comes as no surprise that trading activity in the equity market slid to very low levels during the last six months with only €13.8 million worth of trades transacted.
This represents a significant decline compared to the €33 million equity market activity transacted in the first half of 2008.
He said the MSE Share Index recovered half of the losses incurred in the first quarter of the year but still lies 8.6 per cent below the level at the start of 2009.