• Known for being the place where regulatory innovation and emerging technologies come together, Malta has created the right conditions for companies both local and foreign to thrive.
  • Moreover, its growing and nimble economy, together with the fact that the country’s GDP (gross domestic product) has been growing at a steady 5% annually prior to the pandemic, means that the island has built a reputation for being one of the fastest growing economies in the EU (European Union).
  • If you are looking to make the most of local opportunities and invest in well-known and trusted Maltese companies, one way of doing so is through a Malta-related fund like the 3%* Malta High Income Fund.
  • Offering investors regular income, the fund is highly diversified to boost your investment returns, while it is actively managed for your own peace of mind.
  • Undoubtedly, the COVID-19 pandemic which hit the world in both an unprecedented and forceful way, has left its mark on Malta. Yet, GDP has rebounded robustly in the second quarter of 2021, jumping 13.4%, with this expected to surge further in the next two years. Meanwhile, Moody’s confirmed an A2 stable rating for the country.
  • Interested to tap into local opportunities? Get in touch with us today to book an appointment with one of our professional investment advisors.

With a booming economy, a favourable business environment and a dynamic, young and international workforce, Malta has positioned itself as one of the most economically successful European countries.

Undoubtedly, the COVID-19 pandemic has hit the world in both an unprecedented and forceful way, with no country, economy or industry escaping the clutches of its effect. According to the European Commission (EC), the Maltese economy took the third largest hit in the EU as a result of limitations on air traffic, tourism and social activities. Nonetheless, this toll was partially mitigated thanks to the various stimulus measures put in place.

During the second quarter of 2021, local GDP has increased and is expected to grow further in 2022 and 2023. Meanwhile, as the pandemic brought a number of local businesses to a screeching halt, others adjusted their business model, took on the challenges head on and managed to mark a profit during the most unusual of times.

With economic recovery well underway as many of the pandemic restrictions are increasingly being lifted, below we delve deeper into the ins and outs of investing in local companies and the economy, Malta’s future economic outlook and how investors can tap into these opportunities.

Why invest in the Maltese economy?

Known for being the place where regulatory innovation and emerging technologies come together, Malta has managed to create the right conditions for companies of all sizes, both local and foreign, to thrive, while innovation and competitiveness in particular, have been the hallmark of the country’s development strategy for the past 20 years. As a result, the island has created the right economic environment to meet the demands of the global market, attracting in its wake investors who are convinced of its potential and future.

So why Malta?

The EU advantage

As a member state, Malta provides both local and foreign businesses access to the EU’s massive internal market of nearly 500 million people, while the island’s strategic location at the very heart of the Mediterranean and in close proximity to North Africa, the Middle East and their growing markets, in addition to mainland Europe, means that its connections go beyond the EU.

A growing and nimble economy

Marking a steady GDP growth of around 5% annually in the past few years, Malta has built a reputation for being one of the fastest growing economies in the region and perhaps one of the most diverse, boasting a range of sectors including financial services, iGaming, tourism, maritime services, high value manufacturing and others, which form the basis of its economy. At the same time, progress and flexibility have played vital roles in its ability to react quickly to international trends, as well as the global market place. For instance, the country was one of the last ones within the EU to enter the so-called Great Recession, yet it was also one of the first to rebound from the economic downturn.

An international finance centre

A globally recognised financial services hub, the depth and breadth of the sector, coupled with its world-class products and services have given Malta a competitive advantage over other jurisdictions. The island offers investors a diverse portfolio of high-quality and well-regulated services for funds, insurance, trusts and foundations, banking and financial institutions, maritime and aviation management services. And as of more recently, blockchain technologies are also available. Indeed, Malta had been leading the charge in disruptive technology, having established the world’s first regulatory framework for blockchain, cryptocurrency and Distributed Ledger Technologies.

Malta and the COVID-19 pandemic

Until recently, Malta has recorded one of the highest real GDP growth rates in the EU, however, the impact of the COVID-19 pandemic has shaken the foundations of his growth model, which is strongly reliant on tourism and immigration. GDP contracted significantly in the first half of 2020 as household consumption and construction activity fell sharply due to safety measures established by the authorities, while restricted air traffic interrupted international tourist arrivals to the island.

The government’s stimulus packages, including the voucher system to residents and the wage supplements to affected employees helped boost consumption in the retail sector, offsetting some of the most adverse effects brought about by the partial lockdown. On the other hand, high household savings have the potential to unlock further consumption as more restrictions are eased.

What is the future outlook of the Maltese economy?

GDP has rebounded robustly in the second quarter of 2021, jumping 13.4% in annual terms and in contrast to the 1.35 % decline marked in the first quarter mainly due to the higher than anticipated containment measures. The easing of restrictions together with recovering confidence among both businesses and consumers spearheaded this expansion, together with increases in both investment activity and household spending. This consumer confidence has been particularly evident during the July-August period.

Moreover, in August 2021, ratings agency Moody’s confirmed an A2 stable rating for the country, albeit it changed its outlook for the island from stable to negative, citing the government’s debt burden, risks associated with the tourism sector and its recovery, as well as the Financial Action Task Force’s (FATF) greylisting. Back in January of 2021, Moody’s had said that it expected the Maltese economy to recover from the pandemic, while public finances were anticipated to be brought under control. At the same time, the ratings agency predicted growth to rebound to 5.1% of GDP this year, as long as tourism arrivals were substantially higher in the second half of 2021, when compared to 2020.

Likewise, the Central Bank of Malta expects GDP to grow by 4.9% in 2021, by 5.4% in 2022 and by 4.7% in 2023, stating that it anticipates the country to reach 2019 GDP levels by 2022. Meanwhile, according to the EC’s Winter Forecast, Malta’s economy is set to experience the fourth largest growth in the EU in 2021, at 4.5%.

The resumption to normality, together with the successful vaccination rollout and improved macroeconomic conditions have given a boost to a number of local sectors, such as services, retail and leisure. The hospitality industry was particularly hit by significant operational challenges, so much so that inbound tourism for much of 2020 was close to zero as the number of non-resident guests on the island saw a drastic drop of 73.3%, according to data by the National Statistics Office (NSO). However, the expected rollout of vaccinations in 2021 and a gradual easing of restrictions in the EU should set the tourism sector back on the path to recovery and re-invigorate domestic demand.

In June 2021, the country made the headlines across the globe for being greylisted. Although the Financial Action Task Force’s (FATF) greylisting confirmed structural weaknesses with the country’s anti-money laundering framework, according to Fitch Ratings, one of the so-called ‘Big Three credit rating agencies’, alongside Moody’s and Standard & Poor’s, this has no immediate impact on Malta’s ratings and will only cause reputational damage. Empirical research studies so far have provided mixed evidence on how greylisting can affect capital flows and growth, whereas repeated greylisting of Panama, as well as greylisting of Iceland in 2019 and 2020 have had limited economic effects. And according to Fitch Ratings, the current contingency planning, together with the banking sector’s sound credit metrics and the generally reduced risk appetite, should contain the greylisting’s overall impact.

How to invest in Malta

Maltese investors have traditionally preferred to invest directly in individual Maltese companies that are listed on the main market or Prospects. Doing so certainly has its benefits, such as gaining direct exposure to particular companies, however, there are also disadvantages, namely the risk of losing your investment if the company you have invested in does poorly, it could take several weeks or months to sell the stocks, while stocks depend on the liquidity available on market, which could affect investors’ accessibility.

If you are looking to make the most of local opportunities and invest in well-known and trusted Maltese companies, one way of doing so is through a Malta-related fund. A convenient and easier way to invest, funds are popular with both novice and experienced investors alike since money from different investors is pooled together and whereas risk is unavoidable in all asset classes, funds can be a great way to get you going since they offer diversification across a number of different investments, while you do not shoulder the risk alone since you invest together with other individuals. In addition, with a fund, investors can buy into units with underlying net asset value (NAV) as opposed to the fixed price of one bond.

Below are some more benefits of investing in funds:

Diversification: funds enable you to invest in a single product but in a variety of securities, sectors or geographies and doing so with your investments can greatly reduce any potential risks.

Liquidity: given the nature of the local market, liquidity is relatively low, therefore an investor who would like to eventually buy or sell his direct investments in equities or bonds might take longer than expected. On the contrary, being exposed to the local market through a fund, eliminates liquidity risk since an investor can easily sell his units at the fund’s net asset value, which is usually priced daily.

Transparency: funds typically come with the most comprehensive information, typically in the form of a prospectus which sets out the rules under which the fund will be managed.

Safety: protected against insolvency, the investment assets do not belong to the fund company but instead, they are held separately, which means that should something happen, your assets will not be affected.

Professional help: funds tend to be popular amongst investors because they usually offer access to a ready-made investment portfolio by an expert in a particular field. With the necessary skill set and experience, fund managers can take investment decisions following thorough and rigorous research so that you can make the most of your investment.

While there are different types of funds, if you would rather not spread your money across the globe, you have the option of investing in countries you are more familiar with, such as your own. One such fund is the 3% Malta High Income Fund.

With the objective to maximize investors’ total level of return, the fund invests primarily in debt securities and money market instruments issued or guaranteed by the Government of Malta, as well as equities and corporate bonds issued and listed on the Malta Stock Exchange. Ideal for those looking to gain exposure to the local Government bond market, as well as the Maltese corporate bond and equity markets, the fund offers investors regular income, while it is highly diversified to boost your investment returns. At the same time, it is actively managed for your own peace of mind.

Here are the fund’s top holdings:

PG plc 4.3 
Harvest Technology plc 3.6 
RS2 Software plc  
3.5% GO plc 2031 3.2 
3.9% Brown’s Pharma 2027-2031 3.0 
4.35% SD Finance plc 2027  
Ishares Fallen Angel HY EUR  
GO plc  
3.75% Tum Invest plc 2029  
4.65% Smartcare Fin. plc 2031 2.5 

Below is a snapshot of some of these companies.

RS2 Software plc

The company behind the BankWORKS payment processing software used by major banks, payment service providers and other financial institutions all over the world, RS2 has benefited from the accelerated pace of shifting from traditional payment gateways to fast-emerging digital payment systems. Indeed, the company’s diversified business model, in conjunction with its stable revenues enabled the Group to mitigate any complications brought about by the pandemic, so much so that RS2 managed to generate €18.3 million according to its latest interim results for 2021, an increase from the €10.8 million generated during the same period in 2020. At the same time, the company reported that a surge in business across all of its operating segments have served as major drivers for this increase in revenue. RS2’s past investments, coupled with the fact that it has been onboarding large clients within the managed services business division and it has been adding new markets to its existing customer portfolio has boded well for the company and as the payments industry is expected to maintain its current momentum both locally and abroad, RS2 is set to gain further.

PG Group plc

Primarily engaged in the retailing of food, household goods and other ancillary products through the operation of the Pavi Shopping Complex and Pama Shopping Village, PG Group has continued to exceed expectations, achieving solid results despite the challenges that arose as a result of the COVID-19 pandemic. In effect, the Group registered record revenue of €129.4 million in its latest financial results, a 7.9% increase from the €120 million recorded for the same period in 2020. The Group’s supermarkets and associated retail operations sector have been its primary drivers for this growth, which alone registered €111.3 million as opposed to the €100.4 million for fiscal year 2020. Moreover, the Group has managed to maintain its dividend payout to its shareholders. When considering its defensive business model, PG Group is expected to maintain its healthy and stable revenue in the near future.

GO plc

As the COVID-19 pandemic wreaked havoc, causing widespread economic and social disruption, several local businesses increased their reliance on the services provided by telecom-oriented businesses such as GO as they moved their workforce online. As a result, GO managed to generate €93.9 million in revenues so far in 2021, reflecting an overall improvement of 2.5% when compared to the same period last year. Meanwhile, revenues from its subsidiaries have also shown an overall improvement, with the Group’s data centre operations reporting revenues of €12.8 million during the first six month of the year through operations conducted by its subsidiary BMIT Technologies plc, whereas its Cypriot subsidiary Cablenet continued gaining momentum on its recent growth trajectory, with total revenues increasing by 10.5% to €25.6 million during the first half of 2021.

The successful, high pace of vaccinations and the improvement in the public health situation has allowed for a significant relaxation of restriction measures in the second quarter of 2021. Continued strong improvement in business and consumer sentiment, including in the hard-hit food and accommodation services sectors, suggest that economic activity is on a path to a solid recovery, while going forward, growth is expected to remain strong on the back of a gradual recovery in the tourism sector, favourable prospects for external demand for other services and a recovery in private and public investment.

Interested to invest in the local economy and in companies you trust? Get in touch with us to book an appointment with one of our investment advisors.

*Current income distribution yield for the period from 1st May 2021 to 31st October 2021 annualised. This is the income being distributed by the Malta Balanced Income Fund (“Fund”) and is determined on the basis of the income yield generated and distributable by the Fund applicable on this date. The Income Distribution Yield of the Fund and the value of the investment may go down as well as up and past performance is not necessarily a reliable guide to future performance.

The Fund is licensed as a Collective Investment Scheme by the Malta Financial Services Authority under the Investment Services Act, qualifying as a ‘Maltese’ UCITS. Investment in the Fund should be based on the full details contained in the Prospectus, Key Investor Information Document (KIID) and the Offering Supplement which are available on www.ccfunds.com.mt or may be obtained from the below address. Initial subscription charges apply on investment in the Fund.

Approved for issue by Calamatta Cuschieri Investment Services Limited, Ewropa Business Centre, Triq Dun Karm, Birkirkara BKR 9034. Calamatta Cuschieri Investment Services Limited (“CCIS”) is licensed to conduct Investment Services in Malta by the Malta Financial Services Authority under the Investment Services Act.