Some have in the past described the Malta Stock Exchange as the place where people have lost money. Others have also described it where people have made quite a lot of money. It is in the nature of a stock exchange, which is a market place for shares and bonds, that people at times make gains and at other times make losses. This happens not only in Malta but everywhere else in the world. Thus the expectation that investors should make continual gains and no losses is unrealistic.
The intention of this week's contribution is not to assess the performance of our stock exchange. Nor is it an attempt at assessing the share performance of quoted companies. There are professional, expert persons who are certainly more suitable to do such assessments. My objective is just to look at an idea as to how the Malta Stock Exchange could develop in future. However, I do believe that the setting up of a stock exchange in this country was a good thing. It has served its purpose and has provided Maltese investors with a number of excellent opportunities.
Given this success, I feel that we have come to the next stage of its development. It may be stated that this is too soon given that it has been in existence for a little more than a decade. The point is that the type of transformation that we have had in the economy in these last 15 years and the expected transformation in the coming years imposes the need for the further development of the stock exchange. Let us do a brief stock take of the situation.
When the stock exchange was set up, banks were still under government control; Maltacom was still an organisation regulated by a specific law and was called TeleMalta Corporation; government bonds were still being absorbed by the banking system with little opportunity for small investors to buy any.
Since then not only has the government's participation in banking operations been reduced drastically, not only has there been the sale of Maltacom shares, not only has there been the privatisation of Malta International Airport, not only has there been the launching on the stock exchange of private equity, but government bonds and bonds of private companies are freely traded.
Moreover, there has been the launch of collective investment schemes, both local and foreign and, with the entry of Malta in the European Union, Maltese investors have the opportunity to invest abroad without hindrance.
Thus, whereas the investment opportunities that were presenting themselves in the past decade to the Maltese public and the Maltese business sector were interesting, these investment opportunities now appear to be limited for two main reasons.
For the Maltese public there could be more lucrative opportunities abroad where they could invest their savings. For the local business sector, the Malta Stock Exchange could present limitations in their attempts to source additional finance.
There is another more important consideration that needs to be mentioned. The Maltese economy has grown on the basis of its ability to attract foreign investment. Such foreign investment has come in the form of direct investment into activities through the setting up of subsidiaries. The foreign direct investment we have had in manufacturing has all been of this type as has been the investment of Vienna International Airport (in MIA) and HSBC. We have not had institutional investors pouring funds into the economy.
Moreover, foreign companies that may wish to invest in companies quoted on the local stock exchange may find that it is not that easy to find buyers if they wish to dispose of their investment.
Yet another consideration is that it may be too expensive even for the larger Maltese companies to seek a listing on a foreign stock exchange. For these various reasons, the time may have come for government to seek to link up the Malta the Stock Exchange with an international one, such that the Maltese public may have an additional vehicle through which it can channel its investments and the local business sector may have an additional vehicle to source funds internationally.
The internationalisation of the Malta Stock Exchange may necessitate its privatisation. This may seem to be too bold a move. However, given the strength of our regulatory body in financial services and the high professional standards of those companies offering financial advice, it is a situation that could be managed effectively. In my opinion, an open economy such as ours requires the internationalisation of our stock exchange.