Increasing participation in the capital market

This week marks an important milestone in my journalistic duties as it is my 900th article published in the media. To mark this event, it is coincidental that I was recently invited to participate in a seminar organised by Camilleri Preziosi Advocates which dealt with capital markets.

The seminar touched upon many points that I have aimed to address (without much success in most cases) ever since my first media contribution in 2007. It is therefore pertinent to highlight a number of these matters to mark this milestone and also to communicate to my readers the main messages of the event for the benefit of those that were not present.

Over the years, one of my main objectives was to provide salient details of the financial performance and developments of various companies whose securities are listed on the Malta Stock Exchange (MSE). Unfortunately, there is hardly any coverage of these financial disclosures in the traditional media. However, it is positive to note that a number of the online portals launched over recent years are giving much more prominence to these matters and reporting on company financials more regularly.

When mentioning company disclosures, it is important to highlight that I repeatedly lamented for companies to communicate in more detail and also more frequently similar to the strategies adopted by companies listed on international bourses. While a few of the companies (most especially Bank of Valletta plc, APS Bank plc, HSBC Bank Malta plc and Malta International Airport plc) are doing a very good job in this respect, it is unfortunate that most other companies have continued to adopt the same method of sticking to the ‘bare minimum’ as required by the Capital Markets Rules of the Malta Financial Services Authority (MFSA).

Some companies may argue that an Annual Report is sufficiently detailed for investors to have the required information to gauge the overall developments and outlook. The irony is that the European Single Electronic Format (ESEF), which is the new standard electronic reporting format in which issuers whose securities are admitted to trading on EU regulated markets must abide by, is far too detailed and also cumbersome to access online for most people to review. It would therefore be much more fruitful for a company to give a summary of the main highlights and developments in a short report as a customary company announcement.

Given that we are in the midst of the reporting season in Malta, it is disappointing to note that a specific company published an outlook in its recent annual report that is an exact replica as the one provided in two prior reports with the exception to the reference to the year in question! Surely a CEO and a company’s board of directors can do a better job at delivering their messages to shareholders and prospective investors.

There is a dire need for companies on the MSE to dedicate sufficient time and resources to investor relations. It is hugely disappointing to continue to see that most companies view this as simply a customer care support function to assist investors with any queries mainly relating to interest or dividend payments. Companies listed on overseas stock exchanges devote significant time to adequate and informative communications to the market. This is fundamental if local companies want to continue to attract the attention of the investing public even for future fund-raising initiatives.

The need to improve financial literacy among the Maltese population (and not only the investing community) continues to be highlighted in many events. This was another topic that I regularly dealt with since I always believed that this is fundamental to the growth of the capital market. I am proud to have introduced certain important financial metrics into the Maltese financial community and these are now being used regularly by CEO’s, CFO’s and other market participants in various announcements or communications to the market.

On the other hand, the need to devote significantly more time and effort to promote financial literacy is critical and this can easily be gauged by regular conversations with retail investors during annual general meetings and through other forms of communication throughout the year. However, it is important that the correct messages are delivered by any organisation trying to promote financial literacy. Towards the end of last year, I had publicly lamented on the awareness campaign launched across various media channels on the security aspect of a bond issue. It is unfortunate that in my view the underlying message was incorrect and the implications of this is immediately being noticed. I had the opportunity to witness this first hand during a recent phone call with an unknown person who required information on some of the recent bonds that were launched.

Over the past 18 months, I was very vocal through the media and other channels that the Government of Malta lacks a vision for the capital market. This was very evident again with the lack of any initiatives during the 2025 Budget in October 2024 and more recently in the Vision 2050 strategy document that was given wide prominence across the media. With the huge levels of liquidity across the financial system and the billions of deposits seeking instruments giving a reasonable return to supplement other sources of income, a clear strategy for the capital market is needed.

Many countries over the years have successfully developed savings products to deepen their domestic capital markets. There was ample coverage across the international financial media of the model adopted in Sweden. More recently, the MFSA issued a circular highlighting the adoption by the EU Commission of the Savings and Investments Union in which member states are encouraged to establish savings accounts with a focus on “adequate tax incentives as a key driver of long-term savings and investments”. While this is well-noted and positive, various other countries had acknowledged this fundamental requirement several decades ago and adopted such products which were highly successful. In my view, Malta needs to engage the right consultants who have deep knowledge of these successful products in overseas jurisdictions, perform a study of the local financial system and capital market and finally propose a workable solution that could be introduced in Malta.

However, before these products are launched, the local capital market needs to become larger and definitely much more liquid not only in the equity space but also in fixed income (bonds).

On a more positive note, it was good to learn during the seminar that the MFSA are imminently discussing the reduction in the free float requirement. I had mentioned this several times over the years since I firmly believe this is the only way that some large local companies can be attracted to the capital market. This could be an important catalyst to instigate renewed interest in the equity market by various investors.

The increased proactiveness of the MFSA to amend the free float requirement well before the deadline imposed by the EU Listing Package for mid-2026 as well as the events being organised by the MSE to address various initiatives are good indications that the capital market is finally being given more prominence. Hopefully, this will lead to a detailed vision by the government to ensure the sector garners the attention that it deserves.

Read more of Mr Rizzo’s insights at Rizzo Farrugia (Stockbrokers).

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