Just over a decade ago, I published an article titled ‘A road map for the Malta Stock Exchange’, in which I had reported that in his 2016 Budget speech, then finance minister Edward Scicluna had announced that the Malta Stock Exchange (MSE) and the Finance Ministry had set up a committee to draw up a road map aimed at strengthening and developing further the local capital market.
In that 2015 article I had remarked that privatising the MSE through the introduction of a strategic partner and the participation of market participants (MSE members) was fundamental in order to ensure a higher degree of success in growing the local capital market. I had called for this idea to be included among the initiatives on the agenda of the panel of experts devising the roadmap.
Almost a year later, MSE chairperson Joseph Portelli, who has retained his role since then, launched the National Capital Markets Strategic Plan. I had given due coverage to this highly important event in my weekly column at the time. I had highlighted that the most important initiatives that were part of this comprehensive plan were those focused on: (i) increasing liquidity by revamping market-making rules; (ii) extending trading hours to six hours daily; (iii) the listing of Exchange Traded Funds and REITS, and (iv) promoting Malta and Maltese companies to international institutional investors. No mention was made at the time of the possible privatisation of the MSE.
While a number of other initiatives that had been part of the National Capital Markets Strategic Plan launched at the end of 2016 did indeed help the development of the capital market over the years, especially with respect to the corporate bond market, as evidenced by the record issuance last year, a point worth bringing up for discussion once again is the promotion of Malta and Maltese companies to international institutional investors.
Over the past two years, I have clearly highlighted the unfortunate state of the Maltese equity market, and mentioned some action points to try to help improve trading activity given the continued low volumes across all equities except for Bank of Valletta plc, which dominates the activity on the Borża.
In view of the prolonged very subdued investor sentiment among the local investor community, the attraction of foreign institutional investors to the Maltese capital market could be one of the few remaining initiatives to reinvigorate equity volumes, thereby providing a potential exit route for a number of local investors who feel increasingly frustrated at the evident difficulty to exit almost any equity due to the lack of an active two-way market.
A new breed of investors is urgently needed for the public to be able to exit their positions after the lacklustre performance of the equity market over the past several years. The inclusion of new participants in the equity market can be done either through the liquidity provider programme that the MSE launched in 2025 or via the potential appetite from some international investors. Unfortunately, to date, no locally-based institution has taken the initiative to venture into the liquidity provider programme to help deepen the equity market. As such, the weak volumes across most equities remain evident on a daily basis.
“Privatising the MSE through the involvement of a strategic partner is very much linked to the ability of attracting international institutional investors to consider the Maltese equity market”
One must be realistic on the degree of success in attracting international investors in view of the very small size of the market, with only one company, BOV, having a market capitalisation of over €1 billion.
Over the past nine years since the launch of the National Capital Markets Strategic Plan, I am unaware of any events organised by the MSE or other organisations to promote Maltese companies and the local capital market to international institutional investors.
I believe privatising the MSE through the involvement of a strategic partner is very much linked to the ability of attracting international institutional investors to consider the Maltese equity market.
Incidentally, the initial idea of potentially privatising the MSE had been aired by the government at the time when Joseph Zammit Tabona was MSE chairperson in the early 2000s.
Over the past few years, the government has not provided any details to the public on its strategy for the capital market and the possibility of privatising the stock exchange. Equally important would be to have the MSE itself become a publicly traded company, similar to that evident across Europe and other parts of the world.
In fact, an interesting model one could follow is that of the Kuwait Stock Exchange. In early 2019, a consortium made up of the Athens Stock Exchange and three other strategic investors were awarded the tender to acquire a 44% shareholding in Boursa Kuwait. This was followed by an Initial Public Offering by the end of 2019 for 50% of the shares, with 6% retained by the government.
The aim of Kuwait’s Capital Markets Authority was “to boost capital inflows and liquidity on the exchange by increasing its international appeal”. The Athens Stock Exchange is defined as “the qualified international operator” for Boursa Kuwait and provides advisory and technical services to support the expansion of Boursa Kuwait’s product offerings and infrastructure as part of their long-term strategic partnership.
Many Maltese equity issuers may fail to appreciate the benefits of having international institutional investors considering investment opportunities locally. The involvement of international institutional investors is likely to immediately result in a more liquid secondary market.
One of the main benefits of a more active secondary market, together with the presence of international investors, is that it would make it much easier for a company to consider issuing additional shares to fund their local or international expansion plans (companies cannot solely depend on debt funding).
A number of directors and senior management officials of several equity issuers regularly complain about the lack of responsiveness to important announcements, and the fact that equity prices do not reflect a company’s true worth.
A larger pool of investors should help smoothen out some evident price anomalies on the market. In turn, this would also increase the possibility for any sizeable shareholders to seek an orderly exit route, which is a common occurrence across international capital markets.
Traditionally, companies view stock exchanges and capital markets as avenues to raise capital in order to consolidate and expand their businesses, thus becoming value creators in their respective sectors. Achieving greater liquidity, depth and scope across the local capital market should provide sources of wider economic development and growth for Malta.
A concerted effort by policymakers and various stakeholders is needed to enable the equity market to fulfil its proper role to Maltese businesses, investors and the wider economy.
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