17 - 23 May 2001

Have investors lost their confidence in the MSE?

It is worrying to see that only 50 people turned up for an informal meeting for small shareholders organised by the Malta Stock Exchange. With the MSE passing through such a turbulent phase in its relatively short history – its first major hiccup – it is surprising that so few investors showed any interest in attending that meeting; at which they could have called for a clear explanation why their investments have been going downhill for the past couple of months.
Are Maltese investors fed up with the usual explanation given by the MSE for the current bear market or are they total oblivious to the fact that their investments are worth precious little (compared to their initial investment)? Any investor who knew exactly what he is doing with his money would be more than worried if he saw his investments going down by up to 50 per cent in value in a year. If anything, he would go to his financial adviser and demand a decent explanation.
It is commendable that the stock exchange has seen fit to organise such meetings to inform shareholders about the current situation and to educate investors on how to invest and how the stock exchange works. There is a great need for financial education in this country. There have been cases where investors approached stockbrokers and told them they
had no idea where or in what funds or equities their money had been invested. Many small investors were easily convinced – thanks to a market in 1999 and the first three months of last year that was booming – that investing in stock was a sure winner. However, it is now clear that investors were not advised properly when they came to invest.
It is therefore pertinent to comment on the role of financial advisers in this country. The Malta Financial Services Centre is doing an excellent job in regulating the sector. They are strict in assessing new entrants and ensure that everything – including advertising – follows their guidelines. Yet while they also ensure that advisers are fully qualified to give investment advice, an anomaly has been created in this country that runs counter to the spirit of “independent” advice. Most financial companies and stockbrokers have an interest in pushing certain funds or products simply because they represent that particular fund in Malta. There is nothing wrong in doing so, however they cannot really say they are independent when they give advice.
It is very important that a distinction is made between an independent financial adviser and one who gives advice but is also a representative of a fund or equity. Maybe the authorities should consider removing the word independent from titles when it is clear that the individual or firm has a particular interest in an equity or fund. Such a move would guarantee that investors are given excellent advice that is truly independent.
Yet first and foremost, Maltese investors should learn a few lessons in how the stock markets works. In the past they have been blindfoldedly led to invest in equities and funds that today are performing miserably on the MSE. With government bonds, they are playing a safe game, so no worries there. However, there is no doubt that a lack of education on financial matters has contributed to investors’ disillusion and this problem should be addressed as soon as possible. Only then will they have faith in investing further in the local stock market. The dire performance of the MSE is attributable to other factors but The Malta Business Weekly feels that this situation would not have been so bad if local investors knew what they were doing in the first place and not led to believe that they had hit a gold mine that never dries up.

No consensus

We are the first to admit that the country is not doing as well as it should. The government has initiated policies that in our opinion have, to a certain extent, brought about current downturn in the local economy. However, it would be unfair to put all the blame on the government. While it has always been quick to criticise, unfortunately the Opposition has been unwilling to be constructive in doing so. Dr Sant and his party are more intent on slamming every government initiative and creating unnecessary fear among the public than trying to work with the government to solve the problems this country is facing. Putting aside the issue of EU membership, the Opposition has rarely, if ever, showed any willingness to reach any consensus on national matters. A lack of consensus between the government and the Opposition only helps to create further political antagonism. What this country needs is two parties that work hand in hand to the country’s benefit and not political mileage.