The lessons and challenges of 2020: Malta

By: Joseph Portelli, Executive Chairman, Malta Stock Exchange Dec 2020

What changed in your business and what stayed the same this year? What was the impact of the pandemic and/or the economic slowdown?

We have seen an economic slowdown which has affected both listed companies on our regulated main market (RMM) and also companies admitted to our junior market Prospects multilateral trading facility (MTF). Our economy was very much negatively affected by the huge decline in tourist arrivals, which had an impact on many companies listed on the Malta Stock Exchange (MSE). To alleviate the financial stress that these companies were experiencing, the exchange took a number of measures including the easing of payments terms, affording companies up to four months to settle their invoices. Furthermore, late payment fees were waived and where greater financial stress was detected, bespoke payment terms were created giving the hardest hit companies enough flexibility to manage their short-term liquidity and helping them sustain their businesses. Regrettably the economic slowdown has also caused a reduction in exchange listings and admissions to the exchange’s junior market, which prior to the pandemic was growing at an encouraging rate. Despite this however, during the past few months we still managed to see a number of successful corporate and government debt issuances. Thankfully our financial position, is still in stellar shape, and we expect operating income to exceed last year’s results, primarily on the back of lower operating expenses.

What has the pandemic taught you that you didn’t know pre-Covid 19? What’s the most lasting change that 2020 has brought?

The exchange has always been agile, and its technical infrastructure was developed to support remote operations. Our systems are periodically tested to ensure they are able to support the exchange’s operations should an unforeseen situation arise. Pre-Covid, our systems were never tested to the extent that they have been so far. One can say that the pandemic, with all its uncertainties, has given us the certainty we needed about the robustness of our systems and technology frameworks in ways which we had never envisaged. In fact, we were one of the first organisations in Malta which managed to transition seamlessly to an almost 100% teleworking environment as soon as the mobility of workers started being restricted. This has not only increased the flexibility of our organisation but also helped streamline certain services, making the system more efficient.  Perhaps the most lasting change post-Covid will be the wider availability of telework across all functions of the exchange.

What was your most important project this year (regulatory or otherwise) and did it change due to Covid-19?

Although Covid did reduce the exchange’s momentum with respect to listings, it did not hinder in any way our project plans. Following the publication of the consultation document on real estate investment trusts (REITs) during the last quarter of 2019, the exchange continued to develop the technical and regulatory frameworks necessary to enable the MSE to admit REITs. Following extensive discussions with the Malta Financial Services Authority (MFSA), we are very pleased that REIT rules have been approved. Additionally, we are also working on the introduction of our green trading platform. In this regard we also managed to keep the momentum and we have already submitted the first draft of by-law changes to allow for the listing of green bonds. This initiative is in line with the national strategy on sustainable investment and is strongly supported both by government and the private sector. In fact, we have already been approached by a number of prospective green bond issuers.

Another very positive development was the success of the Malta Stock Exchange Institute (MSEI) in attracting a record number of students taking online courses. In a span of a couple of weeks, with the collaboration of the professionals delivering these lectures, we were able migrate all courses online, even attracting international participation. This virtual learning environment is envisaged to continue post-Covid.

What was the biggest challenge for the leadership team? What were your (personal) best and worst moments of 2020?

One may say that the greatest challenge for the leadership team was maintaining effective communication across all levels of the organisation and maintaining the momentum to ensure that output levels were maintained. However, this experience has shown us that there are times when the remote working environment facilitates communication rather than hinders it. It was noted that whereas in the pre-Covid scenario, setting up a meeting may have taken some time, during Covid we found meetings could be set almost immediately.  This new phenomenon has in some cases helped us to expedite our decision-making and ensure efficient delivery of our services.

The best moment was my pride in seeing our managerial team and our staff in general really stepping up and coalescing as a team. If anything our productivity increased tremendously during Covid. My worst moments were the inability to physically interact with many MSE staff and stake holders these last few months. Although the exchange building always remained open, we had only a skeleton staff come in on a day-to day-basis. I also missed presiding over the many events we normally have each year such as our annual art exhibition, investor education conference and annual awards dinner.

What do you see as the key themes for 2021?

The key developments envisaged for the exchange in 2021, are definitely the admission of REITs and Green Bonds to the MSE trading platform. Also, with the economic slowdown and the financial difficulties faced by local companies, we envisage an increase in the demand for fresh capital to help sustain these businesses. As a market we see that this will bring about an increase both in equity and debt issuance, thus raising the exchange’s profile and helping to solidify our position as a capital market operating in line with its mission statement, providing a source of finance both for the public and private sectors while maintaining a liquid and efficient market.