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A Quality Financial Centre |
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Malta Stock Exchange - Chairman's 2006 Report |
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Written by Malta Stock Exchange
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Saturday, 10 November 2007 16:38 |
Malta Stock Exchange
CHAIRMAN'S ADDRESS - ANNUAL REPORT 2006
The start of my tenure as Chairman of the Malta Stock Exchange coincided
with the issue of the Annual Report for 2005 and, therefore, at that
time, I could not but look forward and outline my hopes and plans for
the development of the capital market. A year later, I can look both
backwards and towards the future with perhaps a more experienced and
knowledgeable vision of how the Exchange functions and its role in the
financial sector.
The past year has in some ways been rather tumultuous, not least of all
the level of trading activity registered during 2006 The first five
months of the year registered unprecedented heights in equity trading
turnover. Both prices and trading volumes in equities reached levels
that were not entirely expected although announcements of generous bonus
issues, scrip and rights issues by various Issuers, coupled with a
buoyant economy, provided the right ingredients for such elevated levels
of trading. While equity market trading levels and prices levelled off
in the latter half of the year, comparing year-to-year figures, these
remained high. Overall, therefore, the market registered one of its best
performances of the last few years due almost entirely to equity trading
values.
On the issue of increasing liquidity, the Exchange, in collaboration
with other market players has started to look into the possibility of
introducing market making. Indications are very heartening. There is a
generally a very positive view to introducing market makers and from a
more practical viewpoint, there appear to be very few legislative
changes that need to be made to create a sufficiently robust legislative
framework to support this new market player.
After a quiet start to 2007, trading activity appears to be picking up
and reaching 2006 levels, helped by the new issues that have come to the
market at the beginning of the year which have brought with them renewed
investor interest in market trading.
On the supply side a number of new issues came to the market, including
the first equity to be listed for the past few years together with two
new corporate bonds that were made available to the market through
intermediary offers. All the primary issues were over-subscribed and
closed within a few hours of the opening of the offers to the public,
further highlighting the thirst for new investment opportunities by
investors.
The Tentative Listing Calendar for 2007 indicates a continuous stream of
new issues (and Issuers) coming to the market, including both fixed
income securities as well as a number of share issues. The coming year
will finally see the listing and trading on the Exchange of Treasury
Bills scheduled for the first quarter of 2007. We are pleased to have
seen the enactment of the Securitisation Act during 2006.Apart from the
first bond that is likely to be issued under this Act as announced by
Government in its Estimates for 2007, we are hopeful that further bond
issues will be made as a result of this new Act.
These new instruments as well as new Issuers from diverse sectors of the
economy will add both breath and depth to the market, which, as I have
often said in the past, I sincerely believe, is vital to the continued
development of the Exchange, both locally and internationally.
The number of issues listed during 2006 and projections for 2007 are not
only a result of changing company needs, but also a result of the
pro-active stance taken by the Exchange itself through meeting with
companies and encouraging them to look towards the market for their
financing needs. We intend to continue down this route not only locally
but also internationally. On this issue the Exchange has taken more
practical steps including making recommendations to the Competent
Authority regarding proposed changes to the Listing Rules to facilitate
the listing process and the Exchange has also prepared discussion papers
regarding the possibility of setting up an Exchange-regulated market,
similar to other such markets already set up by other Exchanges.
The proposal to change the corporate structure of the Exchange from a
public entity sent up under a specific law, to a group of companies set
up under the Companies Act has also been in development for a number of
years and I am very pleased to say has reached its final stages in late
2006.
The new structure provides that a Group of Companies will be established
composed of a Holding Company, MSE Holdings plc, which will take over
the emphyteutical lease on the premises from the Exchange and which will
hold 100% shareholding in the operating company, Malta Stock Exchange
plc. Malta Stock Exchange plc will take over the current operations and
functions of the Exchange. Eventually, there will be a further split
between the core operations. Malta Stock Exchange plc will retain
trading operations while a further subsidiary, also 100% owned by the
Holding Company, namely CSD (Malta) Plc will take over the registry and
clearing and settlement functions.
The new corporate structure will provide a suitable platform for the
eventual sale, in full or in part, of the subsidiary companies. This
structure ensures that the property currently being utilised as the
Exchange premises remains within the ownership of Government while at
the same time it provides the best legislative, regulatory and
governance platform to expand current operations into new avenues for
further business and to attract possible future strategic partners.
During 2006 the Exchange registered a pre-tax surplus of Lm501,772, just
over twice that registered for 2005. Increased trading levels had an
effect on transaction fees, amendment fees and turnover charges, which
also helped to raise the surplus registered by the Exchange. Government
listing fees increased, although at the same time, listing fees from
collective investment schemes decreased by 8% when compared to 2005, due
to continued significant delistings. The Exchange's financial position
will be discussed in greater depth elsewhere in this Report, however, I
can say that the Council has undertaken to carry out a full review of
the fee structure of the Exchange, including admission fees and registry
fees, not only with a view to encouraging further business but also to
better reflect the full range of services being offered by the Exchange.
So, what is in store for 2007? The new corporate structure will, no
doubt, take centre stage. While since its inception the Exchange has
operated as an independent entity operating within a highly regulated
environment, the shift to a company structure together with all the
attendant legislative, regulatory, operational and procedural changes
that this will entail will be significant. The Exchange at the end of
2007 will look very different from what the Exchange looked like at the
beginning of the year. However, in spite of all these changes there will
not be any compromise on the continuity and integrity of services being
offered.
Attracting more companies to the market will remain a priority as it is
only through increased listings that the Exchange can continue to
thrive. Encouraging local, family-owned companies to list remains high
on the agenda, although we intend to look further afield, both within
other EU jurisdictions and outside the EU.
Apart from the considerable corporate changes, 2007 will also bring with
it several operational changes. MiFID, the Transparency Directive, the
EU Code on Clearing and Settlement, an upgrade to the trading system,
Target2, and the introduction of the Euro, to name but a few, will all
come on stream during 2007. All these will be covered elsewhere in this
Report, however, needless to say, all these entail significant technical
implementations apart from legislative and regulatory changes. The
framework within which the Exchange will be operating within at the end
of 2007 will be quite different from what it is now.
The coming year can, therefore, be said to be a year of significant
changes. The Exchange we have all known for the past 16 years will
effectively cease to exist, however, to be replaced, I am sure, by a
stronger and more vibrant company, fully equipped and ready to take on
future developments. I do not pretend that the coming year will be easy,
however, I am sure that with the continued support of my fellow Council
Members and the Management and staff and market participants, the
Exchange will be able to meet all future challenges.
Joseph Zammit Tabona
Chairman
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