Malta Stock Exchange Index 'worst performer in Europe'

The Malta Stock Exchange Index is possibly the worst performer in Europe and one that is currently worse than where it was at the height of the market meltdown in March 2020, the boss of Malta’s largest life insurance company, has complained.

David Curmi, CEO of Mapfre MSV    Life p.l.c., told BusinessToday that on 31 March the MSCI World had fell to  -20.10%, the MSCI Europe (excluding the UK) -21.06%, the MSCI Emerging Markets -19.05% and the Malta Stock Exchange -19.29%.

But in June major indices made a remarkable recovery.

The MSCI World was at -5.34%, the MSCI Europe (excl. UK) -9.49%, the MSCI Emerging Markets -5.50% and the Malta Stock Exchange -13.19%.

“Markets improved further at September 2020 with the MSCI World and MSCI Emerging Markets moving into positive territory yet the Malta Stock Exchange Index deteriorated from -13.19% to -26.06%,” Curmi said in a message on LinkedIn.

“Clearly Maltese investors are silently suffering.”

Asked about the possible reasons behind the MSE Index’s dismal performace, Curmi said a number of reasons stood out.

Maltese investors should learn to diversify their investments and not dump all their savings into one stock or bond, he said.

Curmi said that this was linked to another shortcoming of the MSE Index: a lack of diverse offerings.

“Maltese share listings are primarily tied to property, real estate or banks and finance houses,” he said. “We lack the tech startups, comms companies, and tourism and holiday-related companies that one finds listed in all top stock exchange indeces worldwide.”

Unfortunately therein lies the problem, in that while investors are hesitating to keep dumping money into property shares and bonds, most companies are reluctant to float on the MSE when there was so little activity.

Curmi believes many Maltese private investors have been disillusioned by this year’s performce.

“If you invested €100 before March this year in a local bank listed on the Stock Exchange, your investment is now worth around €70,” he said.

And to add insult to injury, banks had decided to postpone paying dividends this year, leaving investors with no return whatsoever and their investment devalued considerably.

BusinessToday spoke to a financial analyst, who agreed with Curmi’s assessment, even going as far as to say that investments lost even up to 40% of their value since March this year.

“Unfortunately, the gamut of local investment opportunities is what it is, and the situation has not been made any better with the issue of government bonds,” the source said.

In fact, government was currenly limiting bond issues to plans like the 62+ scheme.

And because these are heavily over-subscribed, investors were quite limited into how much they could invest, and how often, in these bonds.

Government also issues a number of bonds that are auctioned off to commercial investors.

The lack of investment opportunities, coupled with a general hesitancy to invest under the current conditions brought about by COVID-19 worldwide, left banks with surplus liquidity, that they could not easily transfer into loans or investment themselves.

“This meant banks were depositing heavy cash quantities with the Central Bank or the European Central Bank, having to pay charges on that money,” the analyst said.

“They instead turned to investing heavily in the block bonds auctioned by the government, leaving private investors even less chance of investing their money.”