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November 2019 investment update

October was a surprisingly good month but the wall of worry mounts, writes our Head of Investment Management, Simon Black. Download your copy of our November 2019 investment update and watch our briefing video to find out more.

How we’ll live then

Escape to the country? Not for most of us. Experts reckon the world in 2050 will be dominated by ‘megacities’. What will they be like to live in? Here are some ideas…

Dolfin launches Private Investment Club

Today we announced the launch of our Private Investment Club. The new offer is available to existing clients, providing exclusive, pre-screened investment opportunities across a variety of sectors and regions.

Digital ambitions

The Malta Stock Exchange – which Dolfin has been a direct member of since last year – has been trading since 1992. As it nears its 30th anniversary, it is looking forward to an increasingly digital and international future says its Chairman, Joseph Portelli.

22 October 2019 / Macro & Markets
Author
Dolfin

The Malta Stock Exchange – which Dolfin has been a direct member of since last year – has been trading since 1992. As it nears its 30th anniversary, it is looking forward to an increasingly digital and international future says its Chairman, Joseph Portelli.

The Garrison Chapel in Valletta has seen plenty of evolution over the years. Built by the British in the 1850s, it has served as a place of worship, a school and a post office mailing room. Since 1999, it has housed the Malta Stock Exchange (MSE), a role which means it continues to be a place of innovation.

Since Joseph Portelli took over as chairman of the bourse in May 2015, there has been a concerted push to modernise the institution, to attract more investors and companies and enable it to compete on the wider European stage. “We want to have more international listings and to be able to cater more to institutional clients. That’s our strategy,” he explains.

Joseph Portelli, Executive Chairman Malta Stock Exchange

Portelli can point to plenty of significant changes in the four-and-a-half years he’s been in charge. In 2016, the Prospects Multilateral Trading Facility (MTF) was launched, aimed at small and medium-sized enterprises. That was followed in 2017 by the launch of the Institutional Financial Securities Market (IFSM) where asset-backed securities can be traded. The MSE group has also set up a fintech accelerator and the MSE Institute to provide training.

Market performance over this time has been impressive. There have been the inevitable ups and downs, but the Total Equity Return Index grew in 2015, 2016 and 2018, with only a small 1.5 per cent drop in 2017. At the end of August it stood at 9,770 points, up almost 9 per cent since the turn of the year.

High performance

“It’s one of the best performing equity indices in the EU and there are a lot of reasons for that,” says Portelli. “The biggest is that Malta is a great place to do business. The government is very pro-business and the economy has done very well and that has been reflected in equity prices.

“For such a small country we have really good capital market penetration,” adds Portelli. “Our capital market is open to SMEs and local industry and we’re very happy with that.”

There have been some challenges, however, including a fall in turnover volumes for Malta government stocks. The MSE has reacted by cutting costs and this year Portelli says it is hoping to have record earnings and potentially record revenue. “We’re pretty lean and we’re looking forward to growing and doing interesting stuff.”

There are a number of notable developments in the pipeline. Legislation is now in place to allow exchange traded funds and the MSE is also hoping to welcome real estate investment trusts to the market soon.

“There is a real possibility that we’ll be one of the first exchanges to list security tokens.” – Joseph Portelli, MSE

The MSE has ambitions to strike out in more innovative ways too. In July 2018, it created a subsidiary called MSX, which has since signed memorandums of understanding with two digital trading platforms, Binance and OKEX, to set up joint ventures for the trading of security tokens – digital financial instruments which allow for fractional ownership of assets.

“We think we will be one of the first stock exchanges in the world that will have moved in to the security token space,” says Portelli. “There is a real possibility that we’ll be trailblazers here and we’ll be one of the first exchanges to list security tokens.”

There are some key attractions with security tokens, including the fact that they allow for far faster settlement times. They are also adaptable and can be used for shares, bonds and even real estate.

Global future

“We have had some interest from foreign players,” says Portelli. “There’s a lot of potential, particularly in the private placement space. Today with private placements there are very long holding periods, but if you can tokenise private placements you give liquidity to the whole market.”

Security tokens could help to put Malta on the map of more investors, although it is likely to take time for this part of the market to develop. “I don’t think that it’s going to explode overnight. It will take a while, but we’ll have the infrastructure in place,” says Portelli.

“Malta’s economy has room to grow significantly further.” – Joseph Portelli, MSE

The MSE isn’t losing sight of more traditional services though, and continues to reach out to companies and sectors looking to raise finance in more conventional ways. One example was the €20m bond issue by Together Gaming Solutions in July, the first on the MSE by a gaming company and an area where Portelli sees plenty of potential. “There are about 250 gaming companies in Malta,” he says. “If we can get more to list in Malta, that would be fabulous. I think there’s a lot of potential for that.”

This highlights the ongoing ambition Portelli has for the MSE and indeed for Malta as a whole. “Geography doesn’t necessarily limit the size of the economy – just look at Singapore, a relatively small country but doing very well economically. In our current business-friendly environment, I think Malta’s economy has room to grow significantly further.”

 

 

 

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