FEATURE
Issue 42 |
Distributed with Times of Malta
January 14, 2016
Four initiatives to speed up commercial cases
The Metropolis project (above) remains a hole in the ground and the government is still negotiating with Ablecare over Marsa Shipbuilding. Will any major projects finally see the light of day in 2016? see pages 10 and 11 >
NEWS The government has reduced the performance guarantee for SMEs from 10 per cent to four per cent but will it be enough to encourage more of them to tender for public contracts? see page 3 >
Vanessa Macdonald The government is working on four initiatives to speed up commercial court cases but does not intend to set up a formal specialised court in the near future. Justice Minister Owen Bonnici said that the Finance Ministry was working with his own to draw up amendments to company and commercial law to improve insolvency cases, on the suggestion of economist Alfred Mifsud. “We are making a number of interesting ad hoc amendments which will make it easier for companies to either be given a chance to recover – or to cease trading and unwind. This is being done with expert input from the Malta Financial Services Authority, at its own expense. “I expect these to be published within the coming months, perhaps after some targeted consultation,” Dr Bonnici confirmed. “Insolvency has been identified as one of the main challenges for businesses and
through these changes we will be able to make a lot of headway.” The second initiative – which will raise the threshold for the Small Claims Tribunal from €3,494 to €5,000 and that for the Magistrates Court from €11,646.87 to €15,000 – is now at an advanced stage in the parliamentary process and will come into force in a few weeks. The clearance rate of the tribunal has been accelerated so that 23 per cent more cases are being decided than are added to the caseload and only two of three vacancies for tribunal chairmen were filled as the cases are being dealt with so much quicker. He also explained that 13 fulltime court attorneys were appointed recently for civil and commercial cases – as a way to improve case duration. “In foreign jurisdictions, rather than merely relying on more members of the judiciary, they appoint court attorneys who prepare court judgments and do research for the judge. This means judges are not deterred from
accelerating the taking of evidence out of fear of creating a huge pile of judgments to be written.” The court attorneys earn almost 90 per cent of what a magistrate would (net of allowances), and were chosen by the judiciary to ensure that they were independent of the ministry. The fourth initiative has wide international implications: London has already set up an international court dedicated to financial services and Malta is looking for ways to also tap into the growing demand. An international call has been issued seeking a strategic partner for the Arbitration Centre, with considerable interest shown. “The deadline is in a few weeks but we are very encouraged by the response so far. We could never do this work within our current system. This partnership could put Malta on the map as an alternative to London, not only for financial services but also for shipping. This is an opportunity staring us in the face,” Dr Bonnici admitted.
These initiatives will appease some of the constituted bodies and international firms that repeatedly identify the local courts as being a millstone around the island’s neck – affecting its rankings and reputation for both competitiveness and attractiveness. However, Dr Bonnici said that setting up a formal commercial court was not on the cards for the foreseeable future. “There is an informal distribution of duties and some magistrates and judges do focus on commercial cases and I can see this expanding. Formalising it would have its ups and down. It would increase specialisation but the downside is that it would create an uneven distribution of caseload between members of the judiciary. I cannot have a member of the judiciary who would only take commercial cases and end up with fewer cases than any other,” he said. “We cannot afford the luxury of specialisation. Once the backlog has been cleared, then we might be able to consider it.”
NEWS The government announced its deal with Huawei last year with considerable fanfare, but apart from a skeleton staff at its office at Smart City, has any 5G research been launched? see page 6 >
NEWS Banks had their wrists slapped last year for their charges and practices but will anything change? Don’t hold your breath. see page 16 >
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NEWS
Lower performance guarantees in force The government has reduced the performance guarantee that SMEs must provide, which is retained by the contracting authority until the contract is completed. The previous amount of 10 per cent of the contract value has now been reduced to four per cent since December 1, as promised in the Budget last November. A single bond will also apply for multiple contracts. The changes were meant to boost SME participation in public procurement contracts. SMEs win fewer contracts than they should, given their prevalence in the economy. A study commissioned by the European Commission in February 2014 found that although 63 per cent of the contracts in Malta are won by SMEs, their value is only 26 per cent. In contrast, SMEs only get 55 per cent of contracts in the EU on average, but their value is 29 per cent of the total – although there are considerable differences between member states. In terms of the number of contracts won, SMEs’ share ranged from an estimated 84 per cent in Greece to 44 per cent in Spain. If the share of public procurement equalled SMEs’ share of gross value added in the economy, the average would be almost double – 58 per cent of the value. Another factor which works against Maltese SMEs is the fact that 53 per cent of above-threshold public procurement contracts were awarded to companies from outside the country between 2009 and 2011, higher than in any other member state. The reduction in guarantees was aimed at easing one of the stumbling blocks – the negative impact
on SMEs’ cash flow – but there are others. E-procurement has made it much easier for SMEs to access tenders. The Contracts Department has also been working to reduce the time that it takes to award a public contract and, from 250 days, this has now been reduced to 115. “We are still lagging behind the EU average and the public sector needs to simplify processes even further to increase efficiency,” a Finance Ministry spokesman said. The ministry said that other initiatives will be taken in the coming months to help increase the share of public procurement contracts as well as to expand it, such as fiscal incentives when they employ graduates to assist in R&D, incentives for more efficient use of energy and monetary assistance for relocation. The impact of public procurement contracts should not be underestimated: in 2011, member states spent €2.4 billion – 19 per cent of the GDP – on public works, goods and services.
“If the share of public procurement equalled SMEs’ share of gross value added in the economy, the average would be almost double”
SharE of contractS: PErcEntagE of totaL Malta
EU
Micro
8
18
Small
30
21
contracts under €500,000
contracts over €500,000
Median contract value (2014)
Median
25
17
number: 368
number: 85
EU: €300,000
Large
37
45
Value: €65 million
Value: €133 million
Malta: €28,000
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NEWS
Late payment interest rate set at 8.05% Suppliers can for the next six months charge 8.05 per cent interest if their invoices for commercial transactions are not settled within 30 days. The European Commission Directive 2011/7/EU on combating late payment in commercial transactions was transposed in Maltese law in 2012, with the interest rate being reviewed every six months on January 1 and July 1. Suppliers are entitled to eight per cent plus the ECB intervention rate – 8.05 per cent for the current period – and are also eligible to claim a minimum of €40 to compensate for the expenses incurred to recover past-due money from the trade customer. The late payment charge applies to business-to-business transactions, as well as to transactions with public authorities. Although the parties can agree between themselves to extend the credit period, the legal notice stipulates that this cannot exceed 60 calendar days. The Malta Association of Credit Management pointed out that the directive also obliges member states to ensure that an enforceable title will be obtained, irrespective of the amount of the debt, within 90 calendar days of the lodging of the creditor’s action or application at the court.
Although the indicator for credit management – the average time taken by customers in settling their invoices due to their suppliers – has improved, from 90.93 days in 2013 to 83.50 in December 2014, this is clearly a long way from 30 days, and the MACM does not expect dramatic improvements in the survey for 2015 due to be released shortly. “A report issued by the European Commission referred to late payment as the major cause of business insolvencies, threatening the survival of businesses and resulting in numerous job losses. “The Commission’s report on late payment and its consequences clearly noted that the public authorities are not leading by example and are paying their suppliers remarkably late: ‘Late payments by public administrations undermines the credibility of policies and contradicts declared policy objectives to provide for stable and predictable operating conditions for enterprises and foster growth and employment’,” MACM director general Josef Busuttil said. “It also said public authorities do not face the same financing constraints as businesses so late payment in their case was avoidable and should therefore be more severely sanctioned when it occurs.”
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NEWS
University team to visit Huawei R&D Centre A delegation from the University of Malta will be visiting the Huawei R&D centre in Milan – the Global Microwave Competence Centre – which is involved in the some key research areas, including 5G. There was, however, little concrete news with regards to the company’s activities here, following a memorandum of understanding signed with considerable fanfare in July 2015 with the Maltese government. Huawei opened an office in Smart City with a skeleton staff, and is now evaluating résumés for the vacant positions. “As far as the business will increase, the staff will grow as well,” Enrica Banti, in charge of external relations for Huawei in Italy and Malta, said. She confirmed that Huawei was in talks with two local operators interested in upgrading the infrastructure in view of the potentialities offered by 5G, and that the company was also willing to provide “various services and support to the government, including sharing of best practices providing solutions for Digital Malta ICT strategy plan”.
“Two local telecom operators expressed their interest in such next-generation testing with Huawei” Huawei is also planning to extend its global flagship educational project Seeds for the Future to Maltese students. “Seeds for the Future programme is a cornerstone of Huawei’s efforts to address the e-skills challenge. This elite ICT talent programme selects gifted university students for an ICT study trip to Huawei’s headquarters in China. The programme currently spans 57 countries worldwide. In Europe alone, 23 countries are involved, and more than 500 young people have participated in the programme since its European launch in 2011,” she said. Asked what was being done with regards to the testing of 5G – one of the main thrusts of the agreement – a government spokesman said that “such testing required a lot of planning and preparation”. “Two local telecom operators expressed their interest in such next-generation testing with Huawei. This is important in order to conduct field tests of such new technologies using prototype kits. Once all the technical preparations are completed, testing will take place as planned,” he said.
A HUAWEI ADVERT AT DUBAI AIRPORT. PHOTO: SORBIS/SHUTTERSTOCK.COM
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INDUSTRY FOCUS
Banks as restrictors or innovators Banks in Malta are in a privileged position when it comes to feeling the pulse of the local economy. They can see which sectors are growing and which are waning, forecast property trends and spoon-feed SMEs. They are also able to pick up the warning signs from sectors in trouble and influence the government’s debt management through their treasury operations. It is therefore always insightful to see what they have to say about the past and present years. Sparkasse, which focuses on private banking, investment services and custody/depository services, benefitted from Malta’s growing reputation as a financial services jurisdiction. Managing director Paul Mifsud said that the bank’s financial figures for 2015 were very positive, “exceeding all expectations” but he fretted about the lack of momentum in the sector. “So 2015 was yet another year to boast about. However, looking back at the sector in general, it is sad to admit that the sector hasn’t done much in terms of innovation. On the contrary, banks have become more ‘particular’ – for lack of a better word, on taking up new initiatives. “This mainly stems from the fact that banks have had to cope with the onslaught of regulation landing on their desks year on year since the financial crisis of 2008. As a result, banks have been busy realigning their resources by shrinking their business, ridding themselves of non-core services
and redirecting these energies towards developing their legal, risk, reporting and compliance departments. Deleveraging risk in the banking sector will certainly remain high on the agenda for the foreseeable future,” he said. He believes that this has created a vacuum that has not gone unnoticed by entrepreneurs. “The industry has seen the development of other financial institutions such as payment service providers, electronic money institutions as well as card providers emerge and enter the market to fill in the void banks have left ripe for cherry picking. “There are also serious attempts being made on creating alternative currencies such as cryptocurrencies. It is an inevitable phenomenon in business, that one man’s
“Looking back at the sector in general, it is sad to admit that the sector hasn’t done much in terms of innovation” loss is another’s fortune. We will see more of this develop in the future as banking risk appetite will continue to diminish and new providers emerge. It will be a matter of time for this phenomenon to manifest itself more in the lending space too,” he warned. One aspect that particularly worries him going forward is Malta’s negotiating capabilities vis-à-vis certain key proposed EU measures.
“What will be our position if these fiscal measures are adopted – and what will be their effect on the financial services sector in general? This reinforces the argument that innovation should be encouraged rather than restricted.” Valletta Fund Management reported good growth in the fund industry in 2015, with Mark Vella, the head of marketing and business development, noting that
the aggregate assets under management of funds managed by Malta-based asset management companies reached the €70 billion mark. “Considerable growth was registered in the funds investing in real assets. Some of the main recent developments in the local funds’ sector include the passporting of Ucits funds into other EU domiciles, the cross-border mergers of Ucits 4 funds of Luxembourg and Swedish origin into Malta-based Ucits and a continued strong and growing presence of fund administrators, fund managers and custodians,” he noted. Given VFM’s international involvement, he was also able to give a global view of what 2016 could bring.
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INDUSTRY FOCUS/NEWS
“The G7 economies are expected to grow faster than two per cent in GDP-weighted terms, which would be the fastest pace since 2010. In contrast, the E7 emerging economies will grow slower than their trend rate, which is still faster than the G7. “Three geopolitical issues will continue to dominate the news headlines: first, the migrant crisis in Europe; secondly, the response of the international community to the crisis in the Middle East; and thirdly, the referendum on the fate of the UK’s membership of the European Union. “Commodity prices are also expected to remain lower for longer. This will be good news for most businesses, households and policymakers in commodity importing economies but a challenge for countries that rely heavily on commodity exports.” HSBC Bank Malta’s CEO Andrew Beane has only been in the hot seat for a few months but he is already gushing about the local situation: “Malta is a vibrant and diversified economy, with growth rates higher than the EU average,” he enthused. However, he was pragmatic about the pressures on banks, which he said would make 2016 another challenging year for the banking sector. “HSBC Bank Malta looks forward to the potential that the new year will bring with it as the bank connects its customers to growth opportunities. “While continuing to play a key role in supporting the Maltese economy given the increasing number of projects, new businesses and FDI, the bank believes there are significant prospects for its customers to grow internationally as a result of the increasing opportunities resulting from global trade, as well as the funding being made available by HSBC Malta through the €75 million Malta Trade for Growth Fund launched in 2015,” he said. Mario Mallia, the chief executive officer of Bank of Valletta, was upbeat about the banking sector in Malta, saying it remained a healthy one – but said that this had nothing to do with luck. “This is a result of the prudent banking practice adopted by the main banks in Malta, which focuses on maintaining healthy capital and liquidity levels,” he said. Mr Mallia believes that in 2015 Malta’s economy continued to grow at a very significant rate,
“e new regulatory regime is also exerting cost pressures on the banks, as they need to build teams to monitor and manage their compliance and risk profiles”
especially when compared to other EU member states. “The regulatory environment was pivotal in 2015. It was the first year during which Bank of Valletta, along with other banks deemed to be systematically important in the eurozone, fell under the direct supervision of the European Central Bank. This supervision will continue to grow tougher and more intrusive, spearheading important changes in the banking sector over the coming year. Having a sound corporate governance, strengthening one’s capital base and managing risks consequently became more critical, and banks, both locally and internationally, are evolving to be able to respond to these demands. “This new regulatory regime is also exerting cost pressures on the banks, as they need to build teams to monitor and manage their compliance and risk profiles,” he added. Looking ahead, he said the growth in the Maltese economy was expected to be driven mainly by private consumption. “As a result of the tighter banking regulation, banks are becoming safer, but consequently there is less appetite for ‘riskier’ lending that demands more capital. SME financing will naturally remain the backbone of the Maltese economy, and in this regard Bank of Valletta is committed to continue supporting the players by providing financing.”
ree in four employers plan to hire MBAs The Graduate Management Admission Council (GMAC) survey for 2015 revealed solid 2015 hiring numbers and robust 2016 hiring projections that reflect healthy demand for graduates of master-level business programmes – especially MBAs. Ninety-six per cent of responding employers agreed that hiring business school graduates created value and 68 per cent agreed that recruiting graduates of MBA and business master’s programmes was a priority for their company. “Recent graduates from business and management programmes should see high demand for their skills because employers understand that they are valuable assets to their organisations,”said Bob Alig, GMAC’s executive vice president for school products. Findings in this report represent survey responses from 179 recruiters from across 159 companies of
varying sizes and industry sectors located in 31 countries or regions worldwide. A greater share of employers intend to hire graduates of Master of Accounting and Master in Management programmes in 2016 than did so last year. In addition, 73 per cent of responding employers plan to offer internships to MBA candidates in 2016 – GMAC surveys have indicated that internships remain one of the most successful ways for master’s-level business school graduates to receive job offers. Of responding employers that offer MBA internships 92 per cent plan to increase (26 per cent) or maintain (66 per cent) the number of openings in 2016. In a September 2015 poll, a vast majority of alumni said their graduate management degree helped prepare them for the job market. www.gmac.com/employerpoll
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FEATURE
Projects to drive 2016’s growth Last year saw a number of projects and policies approved and those which take off this year will generate considerable activity. However, some of them remain a question mark. VANESSA MACDONALD updated the major ones. MARSAMXETT TUNNEL AX Holdings was the only bidder for a project which will see a €10 million tunnel dug at sea level linking Grand Harbour and Marsamxett areas – but negotiations will not start until later this month. The tunnel would go under the peninsula at a point between the Grand Hotel Excelsior and the current ferry landing, and emerge by the old Customs Building – meaning that passengers would be able to get straight to the capital via the Barrakka lift. The next stop would be Cottonera. Digging the tunnel will cause minimal disruption as all the work will be taking place underneath Valletta. The man behind the project, group chairman Anġlu Xuereb, said that AX Holdings and its
CORINTHIA SIX-STAR HOTEL The Corinthia Group’s €400 million mega-development in St George’s Bay may launch its planning process in 2016 – although the group has so far said nothing with regards to time frames.
partner, Captain Morgan cruises, envisaged using river-type boats with glass roofs plying the route. These could take as many as 200 people, with the group estimating an annual 1.5 million using the service. “We have done extensive homework, so as soon as we conclude negotiations and Mepa gives us the green light, we could complete the project within just 18 months,” he said. “We are clearly anxious to get going as we want to be up and running by 2017 as it will bring new life to Grand Harbour – especially Cottonera and Dock One, and the Valletta Waterfront. We also see it as a multiplier for other investment, such as a park and ride with a shuttle to the ferry or a link with the sightseeing hop-on, hop-off bus.”
The Corinthia Group acquired the Radisson as part of its takeover of the Island Hotels Group, and will use this and its existing hotels to develop two high-luxury hotels, a beachfront lido and another ‘lifestyle’ hotel for corporate visitors on the 76,000-squaremetre area. Group chairman Alfred Pisani has been a passionate exponent of
UP FOR SALE Banif has yet to reveal who paid €18.4 million for the 78.46 per cent shareholding held by its Portuguese principal, while Lombard is still waiting to see what will happen to the shareholding held by Legacy Laiki as the sale of its assets have been mired in
bringing the level of tourism in Malta upmarket. “Our project at St George’s Bay is part of Malta’s future. We, as are many other Maltese entrepreneurs, are carrying out such projects aiming to achieve the highest standards that will appeal to the most discerning clientele. “Ultimately, we Maltese will be the main beneficiaries of our own success. Higher standards will give us the strength to demand higher room rates and still provide value for money. “Collectively, we own an island that is unique in the world because of our location, our climate, our heritage and history, together with our family values that assure warmth and security. Above all, we have an individual ability to create something out of very little. It is this style that has made the Maltese tremendously inventive. “We will continue to develop our island with a greater appreciation of these values and we shall progress to achieve standards that are among the best in the world.”
MARSA SHIPBUILDING In September 2015, Ablecare Oilfield Services signed a memorandum of understanding with the government after it was chosen to take over the 175,000-square metre Malta Shipbuilding site, investing €55 million to turn it into a maritime hub, over and above the lease concession. The company has been using part of the site since October 2013 for oil rig maintenance but it is itching to conclude negotiations so that
a dispute between the Central Bank of Cyprus as the Resolution Authority and the former administrator. GO is also up for sale, as EITML (known in Malta as Tecom) announced its intention last July to sell its 60 per cent shareholding, as is Air Malta, with the imminent sale of some of its shareholding to Etihad.
it can take over the rest of the site, which will be used to store heavy machinery and equipment, as well as offer logistic support for the oil and gas exploration industry. Once the negotiations are completed, a parliamentary resolution will be required. Ablecare managing director Paul Abela was upbeat that the deal would be finalised soon: “Following the signing of the MOU in the last quarter of 2015, the parties deepened negotiations and will be reaching the final stages of such negotiations imminently.”
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FEATURE
MANOEL ISLAND
WHITE ROCKS
Will 2016 be the year that the Manoel Island project gets off the ground? When Midi Malta’s interim results were released last August, they included just one terse line stating the company was in discussion with “third parties” who had expressed an interest in the project – an idea first mooted in May 2014 – but nothing has been forthcoming about the elusive investors. The company has now confirmed that it has engaged international consultants “to assist in the preparation of a revised master plan and will continue to pursue various avenues to identify the ideal strategic partner to ensure that the Manoel Island development is executed in the most efficient manner. The new plans will aim at creating a unique development that does
Let us hope it is going to be a case of ‘third time lucky’ for the 45hectare White Rocks complex, which has been gradually falling into ruin since the British left in 1979. The first attempt to find a new use for it in 1995 ended up with Costa San Andrea Ltd, a consortium made up of Maltese businessmen and Spanish hotel operator Sol Melia, as the preferred bidder with a €40 million investment. But over the years, a stand-off developed with the government over whether the tourist development could include real estate and the whole project was abandoned. In 2010, the PN government came up with an even better idea: a sports complex with an investment of €200 million – but it also came unstuck over the percentage of the site that would be dedicated to real estate. The most recent attempt to get some economic value out of the site was launched in October 2014. This time, the site is not aimed exclusively at tourism development but caved in to pragmatic commercial feasibility and allows luxury units and a “high-quality lifestyle community village”. Eleven expressions of interest were received and two went on to actually submit proposals by the
LIFE SCIENCES PARK The scaffolding has been removed and neuroscience company AAT Research has started moving in but it is not clear how many other tenants the Life Sciences Park will host. In October 2014, Malta Enterprise said it was at an “advanced stage of discussions” with a number of companies – but so far, there has been disappointingly little news about the park in San Ġwann, which replaced Malta Enterprise’s offices. Malta Enterprise was hoping to attract sectors interested in setting
justice both to the site and to Malta in general.” Meanwhile, the Midi project is in full swing at Tigné Point with €65 million worth of construction work on the north phase of the development moving at a very steady pace. The residential block Q1 (on the Quisi-Sana side of the development, behind Fort Tigné) comprising 39 seafront apartments, was all sold offplan and delivered on time and on budget during 2015. The latest up operations in a broad range of subsectors and niches, from bioelectronics to genome sequencing, from bioinformatics to the production of isotopes for PET scanners, among others. The park started off in 2011 as the €30 million BioMalta project under the previous legislature, and was meant to be completed by 2014. The BioMalta Foundation was formed to establish a blueprint for the life sciences industry in Malta. The original project included considerably more than the current footprint but was put on hold until the first tenants moved in.
residential phase, known as Q2, is currently under construction and works at penthouse level are about to commence shortly. Q2 apartments should be completed by early 2018. Works are also progressing well on Tigné Point’s new €40 million flagship commercial development, The Centre, a 14,000-square-metre purpose-built office block. Midi anticipates that the business centre should be completed during the latter half of 2017.
METROPOLIS Is the turmoil in Libya – where the main investor Jalal Husni Bey comes from – holding back the Metropolis project? “No,” company spokesman Aidan Barker said. “That is not the limiting factor... It is the car parking extension.” The Metropolis Plaza in Gżira – currently a very deep hole – is apparently waiting patiently to find out whether its bid to extend its underground car park under neighbouring roads will be successful. The reworked design was finally given a full development permit by Mepa for the €120 million project in November 2014. Mr Barker said the developer was still waiting to find out who owns the land – most likely the government – and what the terms would be for being able to access it. To further complicate matters, changes were made to Mepa regulations which means that the designs could incorporate a further 6,000 square metres. “We are reassessing the regulatory changes as we would clearly want to maximise the value of the project… Even though this would entail even more car parking,” he added wryly.
December 11, 2015, deadline: White Rocks Development Company and International Trade Holdings Co. KSC. The Evaluation and Adjudication Committee is now assessing the proposals, with separate subcommittees to evaluate the technical and financial packages. The former has just held its first meeting while the second is in the process of being set up. Concurrently, a due diligence exercise will be conducted by the Malta Financial Services Authority. Economy Minister Chris Cardona said the White Rocks Malta project represents “a major investment and business opportunity”. “It will expand the Maltese economy through value-added activities, job creation and the development of Maltese human capital. This investment, which will be entirely undertaken by the private sector, is viewed as supporting the tourism industry through the promotion of Malta as an upmarket tourism destination. “Furthermore, it is part of an overall government strategy to develop the planned location using rigid sustainable development concepts based on green construction principles that will protect and conserve the important natural resources, including agricultural land, ecological and archaeological/historical areas and the undeveloped coastline.”
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CASE STUDY
Advisers ‘tying’ up to cope with regulation Independent financial advisers are increasingly trying to affiliate themselves with larger brands as regulatory pressures mount up. The second Markets in Financial Instruments Directive (Mifid2) which comes into force in January 2017 will seek to regulate almost all aspects of investment service providers – with the main aim of protecting retail customers. While no one would dispute the importance of this, the reality is that some of the rules are quite challenging for the industry – and would make smaller companies’ business model unworkable. Julia Chatard, the executive director at forex broker FXDD, said that Mifid 2 would, for example, control the retrocession fees which investment advisers receive for providing advice to customers or doing executions on their behalf. “Mifid 2 will increase controls on retrocession fees, saying that they should be ‘justifiable’ which is quite difficult to do, demanding disclosure about fees, charges and costs. And for independent advisers, retrocession fees will be completely banned,” she explained. This is why the ‘tied agent’ structure – affiliating with a large, already regulated company, is becoming an interesting solution. FXDD has been inundated by requests from small- and mediumsized operators and sees this as an opportunity to extend its footprint. The company already employs over 100 people between its
headquarters in Malta and its support centre in New York, but it also wants to have a presence in most if not all of the member states of the EU. “The company grew very quickly over the past 14 years as it pursued various market opportunities created by the volatility of the past few years. The more volatility there is, the more activity, and therefore the more business for us. This is our lifeblood, with just as much scope to lose a lot and to win a lot as our customers do. “But we mitigate this because apart from being an online trading platform, we also observe our clients’ behaviour and do back-toback transactions and hedge positions where we need to,” she explained.
“Ultimately we will be responsible for everything the tied agent does as we are the regulated company”
“We have good opportunities in the market, leveraging our expertise to help smaller operators. The tied agent mechanism has existed in Malta for some time but unfortunately it never picked up – but operators in other member states are very interested.” The benefit for operators is obvious – sparing them the
considerable expense of getting their own licence and also giving them instant access to the online technology developed over the years at considerable cost. “Mifid 2 will create a completely different reality and as regulated entities they would need services provided by ‘qualified’ people but it is not economically feasible for
these small operators to have their own compliance officers and risk managers. This is why so many companies are looking for the support that companies like FXDD can offer.” However, for FXDD it could turn into a sour experience unless it handles it carefully, choosing partners that share its strategy and overall customer approach. “Ultimately we will be responsible for everything the tied agent does as we are the regulated company. Many of them will be quite new to the regulatory framework so we will need to do good due diligence on them. As tied agents, they become our front office, our sales force, which will place a lot of responsibility on us as we will have to train them and
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CASE STUDY
explain the regulations – and they will have to endorse our policies and procedures.” FXDD’s compliance department will still be able to review all their transactions – the advantage of having technology and online business. Once the network of tied agents is in place, it will greatly expand its operations. “We are already very strong in Asia (which is serviced mostly through our NY support centre) but the consolidation of forex markets means it makes sense to be present in other EU countries. It is a bit more complex in other jurisdictions outside the EU as legislation, culture and customer centricity is very different,” she explained. FXDD offers trading in a great number of currencies, precious metals and stock market indexes, but three main currencies – dollar, euro and sterling – represent the bulk of transactions. Lately the Chinese yuan is rapidly gaining in popularity as its volatility means that there is considerable scope for gains. “The dollar is also getting stronger as the American economy is picking up, compared with the other three currencies. I would not be surprised if euro and dollar achieve parity by the end of the first quarter,” she mused, adding quickly that forecasts were notoriously difficult in this sector. One thing that she stressed was that the future lay with technology, which could provide solutions to the regulatory pressures that are mounting on anything to do with financial services. “For example, there are lots of conversations about what they call digital banks, which would only supply services online. Everything is pushing towards compliance and you have to verify your customers’ identity somehow – whether you are facing them or engaging with them digitally. “Our due diligence process is very complex since we are dealing with customers who are nonfacing. It is a complex process and we sometimes rely on due diligence done by other institutions but with many conditions and controls.
Financial literacy in an online world FXDD has come up with a novel way to help customers that have little face-to-face contact with: a series of online tools including a simulation programme. Although much of the work is done remotely via the platform, with only a few e-mails, its site offer numerous charts and blogs to do the spadework for its clients. Ms Chatard is passionate about forex, thriving on its rapid changes but this may prove daunting for those who have never experienced it first-hand. “This is why we offer customers the opportunity to open a demo account, giving them demo points that they can use to simulate trading. It gives you a good understanding of how much money you can make or lose and how quickly!
JULIA CHATARD, THE EXECUTIVE DIRECTOR AT FXDD. PHOTO: MATTHEW MIRABELLI
“I would not be surprised if euro and dollar achieve parity by the end of the first quarter”
“If there were a digital passport which could verify their identity more easily, it would solve many complications. Many software developers are trying to find ways to do this using access to multiple databases. This would change things completely. “Right now many traditional companies look at the situation and say they do not believe it will happen. But I think in a few years’ time – five or 10 who knows – this will be resolved and it will significantly change how the whole industry is operating.”
“Everyone can make money on forex, it is not rocket science. The question is whether you will be able to control your enthusiasm and stop at the right moment. Making so much money so fast might be like a drug and can be quite addictive. But volatility means that amounts can grow very quickly – and drop just as quickly. So apart from reining in their enthusiasm when things are going well, it is important not to panic when things do not go as planned. When prices drop you assess whether that drop is temporary and in that case allow yourself to lose a bit, as long as you are sure that the rate will go back up. “This advice applies to all investment classes – but with forex, things move much faster. You have to keep your head on your shoulders,” she said.
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e Business Observer is Malta’s leading business newspaper distributed with Times of Malta every fortnight. Editorial Vanessa Macdonald, Assistant editor, Times of Malta.
EDITORIAL
Publishers Allied Newspapers Ltd. Content House Group Ltd.
e real challenge for Netflix The introduction of Netflix services has been touted as the death knell for local TV providers. The reality is that it was sounded a long time ago, which is probably why they welcomed the newcomer. It seems to be part of the national psyche to want to get everything for free, from somewhere to park, to somewhere to anchor your boat. Few sectors generate as much self-righteousness, however, as the telecommunications one, especially on social media. Too many of the Maltese are convinced that they are being fleeced for sports content and for film channels, and no amount of economic arguments will ever persuade them that the fees are justified, as they constantly compare them to those overseas. There may be an argument if there were no competition and a single operator was allowed to set prices with a ‘take it or leave it’ approach. But the reality is that there is competition – fierce competition – from illegal and irregular sources. The harsh reality is that operators have to pay for content like sports and films and the cost has to be spread over a limited number of subscribers, since they stubbornly refuse to join forces rather than compete against each other. This is why content prices (or medicines for all that matter) are different in different markets. They may be charged less when buying content for the local market than would companies buying it in the US – but it is rarely pro-rata. How much do we pay? For example, for the film channel, GO charges from €6.99 a month, while Melita charges €1.49 per film on demand. Even this is seen as too much given that you can watch almost unlimited amounts of films and series using technology like Dreambox and Android boxes, without having to worry about monthly fees at
all, with hardly a twinge of conscience because it is all too easy to argue that it was the providers’ greed that “drove us to it”. Unfortunately, the dwindling subscriber base just makes it even harder for providers to invest in good content. Telecommunications companies are not public service providers. Chipping away at their sources of revenue merely puts more pressure on them to raise more revenue from their other services, from internet to mobile to broadband. What will happen next? Satellite and streaming has driven DVD shops out of business in droves. And cinema attendance fell from 2.6 visits a year per capita in 2006 to just two in 2011. To put this into some context, the US average was 4.5 for that year, and that of the UK was 3.1, according to Unesco. And then along came Netflix, with its television series available in batch form and all the films you want as long as you are willing to wait a year to see them (apart from its own content). So it is no surprise that Melita and GO both shrugged their shoulders, seeing the announcement as an opportunity instead to point out that the Netflix experience depended on the superior internet quality they offered… Will people who bought satellite or streaming services now ditch them and decide that they don’t mind paying a monthly fee for Netflix? It seems highly unlikely. Netflix will have to compete with disruptive – and pirate – technology just as the telecommunication companies did. Imagine if the industry – from the film-makers to the distribution channels – had read the writing on the wall before consumers walked away in disgust. The battle has been lost and it is now too late to wind back the clock.
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BUSINESS OPINION
Malta’s role in preventing Brexit
Beppe Zammit-Lucia After Ireland, Malta will be the EU country whose economy will suffer the most in the event that Britain leaves the EU. That is the conclusion of a study commissioned last year by Bertelsmann Stiftung in collaboration with the Centre of International Economics at the Ifo Institut, University of Munich. In a Europe currently faced with multiple challenges, it is tempting for some to see the British renegotiation and subsequent EU referendum as an unnecessary irritation. That would be a mistake. The outcome of the British negotiation will define the future shape and direction of the EU and will determine the success or relative failure of the European project. Let me explain. There are broadly two visions for the future of the EU. The first is a vision of the EU as a model built for the challenges of the 20th century. A Europe at war with itself and challenged by a globalising world spawned an economic community that has moved rapidly to a more centralised organisation seeking to
“e outcome of the British negotiation will define the future shape and direction of the EU and will determine the success or relative failure of the European project” act as one political and economic entity. The role of individual member states became largely subordinate to the needs and wishes of the majority. A Europe where 28 nation states move together in lock step irrespective of their wide cultural and economic differences. The second vision is a Europe of nation states where the role of EU institutions is to oil the wheels of collaboration between different nations. Rather than a federal Europe, such a model envisions a confederation of individual sovereign states. A common framework
would allow variable collaborations between different nations on matters of common interest. As these collaborations are shown to work (or not) others may wish to join. If any particular type of collaboration doesn’t work for some, it can be modified so some can retreat as and when they wish. This is a Europe that operates more to an à la carte menu rather than a prix fixe, set menu. The role of Brussels would be to help craft the menu and provide the knowhow and infrastructure to make such alliances work.
The first vision is based on the 20th century, centrally managed bureaucratic organisational model as used, for instance, by multinational corporations. Politically it is more in line with French dirigisme than with, say, the Swiss political model. I suggest that this model is too unwieldy, too resistant to change and largely unmanageable. It will fail in the 21st century – a time that calls for flexibility, opportunities for experimentation in an uncertain world, and the ability to change and respond quickly to rapidly changing circumstances.
Many multinational corporations have realised that this centrallyplanned bureaucratic model no longer works. Hence the rise of the organisation as a self-organising network – flexible, organic and able to respond better to new challenges that nobody ever predicted. Applied to Europe, this would create an EU that grows organically and in unpredictable but flexible ways. It will create an EU that is stronger and more resilient: culturally, politically and economically. At some stage Europe will need to make an explicit choice as to which broad direction of travel it will choose. The British renegotiation is the first major event that tests this choice. Is the EU able to embark on a process of institutional reform or is it unable to adapt to the 21st century even as it expects and imposes the most aggressive reforms on its own member states? A recent analysis in The Guardian characterised Malta as one of the countries less likely to support Britain in its renegotiation. If correct, that would represent a historic misjudgement. Not only for Malta, but for the EU as a whole. Choosing the bureaucratic rather than the flexible model would indicate an EU that is more obsessed with the ghosts of its past than with meeting the challenges of the future. Such an EU will fail – with or without Britain. Beppe Zammit-Lucia is a leadership adviser and business and political commentator. He is based in the Netherlands.
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NEWS / APPOINTMENTS
Five directors for KPMG
Bank recommendations remain pending Both the Finance Ministry and the Malta Financial Services Authority have washed their hands of the recommended changes to the banking sector, pointing out that it was not up to them to take action. Last year, the MFSA and the Office for Competition within the Malta Competition and Consumer Affairs Authority were asked by the Finance Ministry to review banking operations and charges with a view to improving competitiveness. This followed calls from both local and international institutions, including the Central Bank of Malta and the European Commission. The Office for Competition concluded in its 91-page report that bank lending policies were detrimental to SMEs – but stopped short of declaring that there was any infringement of the Competition Act. The competition authority has the power to take decisions with executive power and to impose fines. However, in the report, it said: “The office considers it preferable to address the above-identified concerns by proposing behavioural remedies,” adding that the recommendations could be put into practice without any adverse effects on financial stability. However, in the report, no feedback from the banks was demanded and no deadline was imposed. The MFSA said that following the publication of the reports, it was invited to attend a meeting
with parliamentary members of the Economic and Financial Affairs Committee. “At that meeting, the MFSA explained that the regulator does not have the remit to influence bank fees and charges. There are however other formal structures in Malta which have such remit, and with powers to investigate further bank practices in this regard,” it said, pointing out that it remained committed to assist any initiatives which may be taken as a follow-up to the various observations and recommendations contained in both reports. The spokesperson for HSBC Bank Malta said the bank had taken note of the contents of the reports and was analysing the recommendations being made by the authority. “The bank played an active role in providing its input and has already started providing its reaction to the report/s in the appropriate forums as it places its customers at the heart of its business and operations,” he said. The Bank of Valletta spokesman was also non-commital: “The bank, together with other banks, is in contact with regulators to discuss the recommendations of the MFSA with the aim of finding an equitable solution to outstanding issues relating to bank charges.” No replies from the Office for Competition were received at the time of going to print.
KPMG has appointed Alex Azzopardi, Claude Ellul, Simon Xuereb, Giselle Borg and Sarah Camilleri as directors, reflecting the continued growth expected to be sustained in the coming years. Mr Azzopardi joined KPMG Malta in 2005 and joined the risk consulting advisory team in 2013, while Mr Ellul joined KPMG’s audit function in 2003 and specialised in the financial services sector, in the banking segment in particular. Mr Xuereb rejoined KPMG in 2011 following a brief absence and has been actively involved in private client and global mobility services offering leading a multidisciplinary team. He currently chairs the high-net worth migration working group for KPMG.
(FROM LEFT): ALEX AZZOPARDI, CLAUDE ELLUL, SIMON XUEREB, GISELLE BORG AND SARAH CAMILLERI
Ms Borg works in the audit department with an industry focus on insurance and pensions and brings over 12 years of experience. She was seconded to KPMG London and works
closely within the KPMG network in servicing multi-national clients. Ms Camilleri joined KPMG’s Advisory Department in 2013, to drive the investment service and funds’ offering.
New partner with Fenech & Fenech Advocates Paul Gonzi has been made a new partner with Fenech & Fenech Advocates, the oldest and one of the leading law firms in Malta, providing value-driven, tailored legal services across all practice areas. Dr Gonzi joined Fenech & Fenech Advocates in 2007 after studying computer and communications law
at Queen Mary and Westfield College, University of London, and has since formed part of the international practice department of the firm. His main areas of practice are employment and seafaring law, data protection and ICT law. The firm’s number of partners now stands at 12.
PAUL GONZI
Deloitte appoints directors and principal Deloitte has appointed two new directors within the audit service line – Michael Bianchi and Ian Coppini – and a new principal within its financial services industry function – Patrick Mangion. Mr Bianchi joined Deloitte in 2000 and has worked on a varied local and international client base. In 2007, he was transferred to the Deloitte UK office in London where he worked in the insurance and investments management practice for two years.
Mr Coppini joined Deloitte in 2000 and has over 15 years’ experience in audits of public and private entities in a variety of industries. He also spent two years at Deloitte offices in Luxembourg and New York. Mr Mangion joined Deloitte in 1996 and has been actively involved in the financial services regulated sector for the past 12 years. He is an expert in asset management and has worked at Deloitte offices in Budapest, London and Zurich. IAN COPPINI
PATRICK MANGION
MICHAEL BIANCHI
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NEWS
EU cracks down on corporate tax avoidance in Belgium Philip Blenkinsop The European Commission has ordered Belgium to recover €700 million from 35 large companies in back taxes in the EU executive’s biggest move yet to crack down on tax avoidance by multinationals. The Commission said Belgium’s “excess profit” tax system, whereby multinationals’ economies of scale can enable them to reduce their tax bases by
Seminar on amendments to Companies Act on Feb. 4 The Malta Association of Credit Management and the Malta Institute of Accountants will be holding a joint event entitled New Amendments to the Companies Act – The Impact on Trade Creditors on February 4 at 1.30pm at the Corinthia Palace Hotel, Attard. The EU Directive 2013/34/EU – also referred to as the new Accounting Directive – was transposed into Maltese legislation in 2015 by means of Legal Notice 289 issued on August 28, 2015, titled the Accountancy Profession (General Accounting Principles for Small- and Medium-Sized Entities) Regulations, followed by amendments to the Companies Act which came into force on November 6, 2015. The new directive takes the small company or group as the starting point in what is described as a ‘think small first’ approach, with additional requirements being imposed on mediumsized and large entities, and also public interest entities. The amendments to the Companies Act enact the requirements of the new directive and, except for a couple of provisions, are applicable for financial reporting periods beginning on or after January 1, 2016. Consequently these amendments will invariably affect trade creditors, due to the fact that published financial statements are one of the main tools used by trade creditors in their risk analysis. This three-hour seminar will include three presentations followed by a panel discussion. The speakers are David Fabri, head and senior lecturer in the Department of Commercial Law, University of Malta; Fabio Axisa, a partner at PwC Malta; and Philip King, the CEO of the Chartered Institute of Credit Management, UK. Visit www.macm.org.mt or www.miamalta.org for more information or call on 2142 3638/9 or 2258 1900.
up to 90 per cent, was illegal because it had been granted to a select number of large companies but not to smaller firms, distorting competition. The companies involved were not named but the Commission said they were mostly European corporations and that they would pay back around €500 million of the amount due. The Commission has faced accusations of a bias in its investigations against non-EU companies, notably US tech giants,
“European corporations would pay back around €500 million of the amount due”
as it investigates tax practices across the EU. In October it ruled that Starbucks Corp. and Fiat Chrysler Automobiles NV benefited from illegal tax deals with the Dutch and Luxembourg authorities, ordering each country to recover €20-30 million in back taxes. It is also investigating the tax arrangements of Amazon in Luxembourg and Apple in Ireland. Belgian Finance Minister Johan Van Overtveldt said the ruling was in line with
expectations and that the “excess profit” system, introduced in 2005, had been on hold since February 2015, when the investigation began. Belgium kept all options open, including a possible appeal, he said. Belgian tax authority rulings, typically for four years, were often granted to companies that had relocated a substantial part of their activities to Belgium or that made significant investments there. (Reuters)
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STOCK MARKET REVIEW
Extreme volatility across international equity markets during 2015
Edward Rizzo In last week’s article I reviewed the main developments across the local equity market during 2015. The MSE Share Index registered its best performance since 2005 with an extraordinary uplift of 33 per cent as most equities registered double-digit gains. The strong share price performance across most equities materialised from improved financial performances and higher dividends to shareholders, various companyspecific developments as well as the low interest rate scenario which led to a surge in demand for equities giving an attractive yield. On the other hand, the main global equity markets had a difficult year. The indices in the US – the S&P500 and the Dow Jones Industrial Average – both registered marginal declines while the Nasdaq gained 5.7 per cent following the strong performances of a number of technology companies including Facebook, Netflix, Amazon and Google which was rebranded to Alphabet. The FTSE100 in the UK suffered a five per cent drop given its large dependence on mining companies which were impacted by the sharp decline in commodity prices. Across the EU, stock market performances were mixed. Among the larger markets, the FTSE MIB in Italy was the strongest performer with a gain of 13.9 per cent followed by the DAX
TRADERS AT THEIR DESKS IN FRONT OF THE GERMAN SHARE PRICE INDEX, DAX BOARD, AT THE STOCK EXCHANGE IN FRANKFURT, GERMANY. PHOTO: STAFF/REUTERS
(+11.2 per cent) and France’s CAC40 (+8.5 per cent). On the other hand, Spain’s IBEX suffered a loss of seven per cent which can be mainly attributed to the uncertainty leading up to the general election in December which resulted in a deeply fragmented parliament. As indicated last week, the smaller equity markets in the eurozone had some very positive performances. The strongest gainer was Latvia (+45.7 per cent), followed by Malta (+33 per cent), Slovakia (+31.5 per cent) and Ireland (+30 per cent). On the other hand, the Greek equity market shed 18 per cent and Cyprus was
“2015 was a very eventful year characterised by extreme volatility”
the worst performer with a 20 per cent decline. 2015 was a very eventful year characterised by extreme volatility. In fact, during the first quarter of the year, European markerts in particular raced ahead with strong double-digit gains. The DAX in Germany rallied by 22 per cent in Q1 followed by
Italy’s FTSE MIB at 21.8 per cent, France’s CAC40 at 17.8 per cent and Spain’s IBEX (+12 per cent). The main reason for this was the announcement of the quantitative easing programme by the European Central Bank in early January which then commenced on March 9.
The markets reacted positively to the larger-than-expected bondbuying programme of €60 billion per month which will last until September 2016. The monetary stimulus programme is aimed at lifting the inflation rate across the eurozone to just under two per cent as well as weakening the currency to boost exports and support the economic recovery. The share prices of the large European exporters were among the most positive performers during the start of 2015. Renewed uncertainty in Greece and fears of an exit from the single currency characterised the early part of summer
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STOCK MARKET REVIEW
2015, leading to a partial reversal across European equity markets as negotiations between the troika of creditors (EU, ECB and IMF) and the Syriza government proved to be difficult. As a deal was finally reached after many weeks of uncertainty and a real fear among investors that Grexit could really materialise, equity markets subsequently rallied in July. As the year progressed, monetary policy divergence became a central theme, as analysts were starting to anticipate that the US Federal Reserve would commence a series of interest rate increases in line with the consistent signs of improvements in the US economy, including a reduction in the unemployment rate towards five per cent. On the other hand, speculation was rife that the ECB would implement further monetary stimulus as inflation remained stubbornly low. Given the negative impact on equities from a rate hike, the US market was volatile and very much dependent on the timing of announcements related to the US economic performance which signalled either the possibility of the start of the rate-tightening cycle or a delay in this respect. However, the summer months were best remembered for the sell-off during the third week of August which commenced in China. Monday, August 24, was labelled ‘The Great Fall of China’ or ‘China’s Black Monday’ – a reference to the crash of October 1987 – as the Chinese Shanghai composite index dropped by 8.5 per cent, the steepest daily decline since 2007. This led to a sell-off in other global equity markets as European indices dropped by around five per cent on the day and the Dow Jones Industrial Average in the US declined by 1,000 points in the first few minutes after the market opened. The US equity market partly recovered by the close of the trading session of August 24 but still ended the day around 3.6 per cent lower. The Shanghai composite index tumbled by 24 per cent between June 15 and August 11 as a series of interest rate cuts by the People’s Bank of China and other intervening measures failed to stem the sudden reversal of the debtfuelled equity market bubble (China’s stockmarket had climbed
by 150 per cent during a 12-month period between June 2014 and mid-June 2015). Many equity markets entered into correction territory in August after the worst monthly declines for several years. In Europe, the DAX fell by 9.3 per cent, the CAC40 shed 8.5 per cent and the UK’s FTSE 100 fell by 6.7 per cent, whereas the S&P 500 in the US dropped 6.3 per cent. The slowdown in Chinese economic growth and the resultant impact across global stockmarkets during the summer led the Federal Reserve in the US to delay the rate hike programme and this supported equity markets during the final quarter of the year. Moreover, at the European Central Bank meeting held in Malta on October 22, president Mario Draghi had signalled the possibility of introducing additional monetary stimulus at its subsequent meeting in December in order to tackle deflationary pressures. This led many investment banks to predict a further weakening of the euro supporting European equity markets in November. However, at the ECB meeting on December 3, although the ECB announced a reduction in its deposit rate to -0.3 per cent and extended the QE programme of €60 billion per month for a further
“Geopolitical tensions, particularly in the Middle East, have the potential to not only affect consumer and business sentiment but also commodity prices, especially oil”
six months until March 2017 (or beyond, if necessary), the actions by the ECB were less than widely expected and the disappointment across global financial markets was immediately evident. In fact, the 10-year German bund yield jumped from 0.47 per cent to 0.68 per cent on the day (one of the biggest one day moves in a long time), the euro
strengthened by more than four per cent against the US dollar surpassing the $1.09 level (the biggest daily rise in the euro since 2009) and equity markets also reacted negatively with the German DAX 30 Index and France’s CAC40 both sliding by 3.6 per cent. A few days later, the US Federal Reserve announced the first interest rate increase since 2006. Although this news was followed by some volatility, the overall movement in US equity markets during the final two weeks of the year was marginal as the move by the Federal Reserve was largely expected and underlined the confidence the Federal Reserve has in the US economy. Following the steep sell-off seen last week (with many global indices suffering the worst start to the year in decades), it is fair to say that the volatile conditions experienced in 2015 will also characterise 2016. The main equity indices will remain sensitive to key developments affecting global demand, in particular the performance of the Chinese economy, the extent to which the US economy is able to handle a series of interest rate hikes and the speed of the economic recovery across the eurozone. Other developments affecting investor sentiment will be political elections across various EU nations,
Rizzo, Farrugia & Co. (Stockbrokers) Ltd (RFC) is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report. © 2016 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
Britain’s referendum on its future participation within the EU as well as the US presidential election. Additionally, geopolitical tensions, particularly in the Middle East, have the potential to not only affect consumer and business sentiment but also commodity prices, especially oil which recently dropped to its lowest level since 2004. Monetary policy divergence will be a central theme this year. Although the Federal Reserve is widely expected to continue with a gradual increase in rate hikes, the economic slowdown in China and the subsequent impact on global economic sentiment can delay such decisions. This could widely affect equity, bond and currency market movements from one period to the next during the course of 2016. Edward Rizzo is a director at Rizzo, Farrugia & Co. (Stockbrokers) Ltd.
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BUSINESS UPDATES
Utilising multi-asset funds in your investment strategy Multi-asset funds are able to invest across a wide range of asset classes, which may include equities, bonds, cash, commodities and alternatives among other asset classes. These type of funds provide a greater degree of diversification than investing in a single asset class, and will help in mitigating volatility that comes with investing in a one-asset class. Multi-asset funds arguably play a role in a low-interest scenario and volatile investment environment as the switching process between assets is simplified. Many managers of multi-asset funds also hedge some risks and add an overlay of short-term tactical asset allocation to maximise return. An active approach to managing risk across the range of asset classes is an important element when setting up an investment strategy. The fund manager
generally seeks to increase exposure to asset classes with a positive stance and, on the other hand, reduce exposure to asset classes where the outlook is negative. Such funds may also invest in strategies that rely less on overall market direction. Real assets, such as infrastructure, are another asset class that these type of funds usually invest in, which provide solid income streams that are somewhat detached from the economic cycle. Other investment opportunities within this asset class are income-derived from utility companies, green energy, social infrastructure and aircraft leasing. In general, these type of funds can offer more stable returns across different market conditions. Multi-asset funds are also available to retail investors, as they can provide different risk profiles and, in view of their
multi-asset exposure, are ideal investment solutions for those investors with a small investment capital. These types of funds, which are available in the local market, are managed by a professional team with a sound background in asset allocation, macroeconomic analysis and portfolio construction. Multi-asset funds developed a clear and transparent investment process that allows ideas to be channelled into a robust portfolio specifically designed to meet its objectives. Past performance is not a guide to future performance and the opinions expressed herein should not be interpreted as investment advice. VFM is licensed to provide investment services in Malta by the MFSA. Issued by VFM, TG Complex, Suite 2, Level 3, Brewery Street, Mrieħel BKR 3000, Malta. T: 2122 7311, E: infovfm@bov.com, W: www.vfm.com.mt.
CLAYTON SCICLUNA, INVESTMENT MANAGER, VFM.
e rise of the interior design concierge service Originally a service offered in hotels, various independent concierge companies have grown to provide an array of different services, providing effective solutions to everyday problems. From booking accommodation to making restaurant reservations, the benefits this service can offer our fast-paced lives are endless. Now, a new type of concierge service has arrived in Malta. LOFT, one of Malta’s leading interior design companies, is offering a comprehensive interior design concierge service to ensure that all of your interior design needs are met. As a busy professional, you are familiar with the stresses involved when an important client decides to jet over to Malta and visit your office. LOFT can ensure that your office looks as impressive, professional or quirky as you would like. On the other hand, if you own a holiday home, you might want someone to prepare it for you before you next visit Malta. LOFT can prepare towels, furniture, rugs – anything you desire for your home to look as stylish and warm as you would like. Furthermore, from concept design to implementation, LOFT will take care of everything, leaving you to focus on the business. Contact LOFT to find out more by sending an e-mail to info@LOFT.com.mt.
Jesmond Mizzi Financial Advisors launches Merill Total Return Income Fund The Merill SICAV plc has launched its first sub-fund, the Merill Total Return Income Fund, aimed at both retail and institutional clients, with an initial seed capital of €15 million. The fund is self-managed but the day-to-day investment management of the sub-fund has been delegated to Jesmond Mizzi Financial Advisors Ltd, who will also promote and distribute the fund. The fund will address long-term investment objectives by diversification of assets and providing regular income, by investing primarily in investment grade bonds, local bonds, and other debt securities. “The fund is aimed at those investors who want to spread their
investments in both local and international investments,” managing director Jesmond Mizzi said. “The fund will invest 70 per cent of its assets in bonds and up to 30 per cent in local and international equities and other instruments. The fund will pay a quarterly income and investors can either invest a lump sum or on a regular basis as a savings plan. Initial fees for the Merill Total Return Income Fund are discounted to 1.25 per cent for all applications received until February 12, 2016. Further information can be obtained from Jesmond Mizzi Financial Advisors on freephone 8007 2206 or on www.jesmond mizzi.com.
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BUSINESS UPDATES
APS Bank appoints Marcel Cassar as its new chief executive officer APS Bank’s board of directors has appointed Marcel Cassar as chief executive officer (CEO) with effect from January 1. Mr Cassar, who has already joined the bank, succeeds Edward Cachia who will retire early this year. Throughout his career, Mr Cassar held a number of senior positions, the most recent being as first executive vice president and chief financial officer with Fimbank plc, the Malta-based international trade finance group. He previously held senior executive roles with Lombard Bank Malta plc (1996-2004), the Malta Financial Services Authority (19911996) and Price Waterhouse (1987-1991). While wishing Mr Cassar success in his new position, the board further expressed its sincere thanks and appreciation to Mr Cachia for his long years of dedicated service to the bank, the last 18 of which were as CEO. MARCEL CASSAR, APS BANK’S NEW CEO OVER 100 EMIRATES AIRCRAFT HAVE WI-FI CONNECTIVITY.
Emirates marks key milestones in its 30th year of operations Emirates, the world’s largest international airline, concluded another year of growth underscored by standout milestones across its fleet, network and customer experience initiatives. In 2015, the airline carried over 51.3 million passengers, which represented nine per cent more passengers during the same period in the previous calendar year. The airline handled over 35 million pieces of baggage in Dubai alone. Emirates added 26 new aircraft to its fleet in 2015, comprising 15 A380s, 10 Boeing 777-300ERs and one Boeing 777 Freighter, rounding off the year with 246 aircraft in service. The airline expanded its network to 150 destinations in 2015, with the addition of six new passenger destinations: Bali, Multan, Orlando, Mashhad, Bologna and Sabiha Gokcen in Istanbul; and three cargo-only destinations in Ouagadougou (Burkina Faso), Columbus (the US) and Ciudad del Este (Paraguay). In August, Emirates announced plans to launch services to Panama City, beginning on February 1. Emirates remains the world’s most valuable airline brand and in 2015 the airline’s brand value grew more than 21 per cent to $6.6 billion, according to The Brand Finance Global 500 report. Emirates operates a daily scheduled flight between Dubai and Malta via Larnaca, Cyprus. www.emirates.com/mt
Sparkasse Bank Malta expands its operations Sparkasse Bank Malta plc has increased its office space in order to expand facilities and meeting rooms and cater to additional staff. ‘’2015 was yet another successful year for us at Sparkasse Bank Malta,’’ said managing director Paul Mifsud. “Year on year we have experienced growth across all our business lines that has encouraged us to make the necessary additional investment locally.”
“This year, we invested in upgrading our IT infrastructure and increasing our workforce. In 2016 we intend to launch a suite of innovative financial services and therefore look to the year ahead with great optimism.” Sparkasse Bank Malta plc forms part of the Austrian Savings Banks and Erste Bank Group.