The stark reality about equities

There has been much hype about the stock exchange and the prospects of making a quick buck.

A well known interesting service on advising in equities starts off by asking a potential client to take the first 1000 dollars and burn them.

Failure to do so, is a sure sign that the person involved has little or no knowledge of the mechanics of the stock exchange.

The advice does not stop here. It goes on by saying that when one invests in a particular equity one should understand something about the companies.

More often than not, very few investors understand the chemistry of the stock exchange.

Many in Malta have invested and suffered. The ones to fare worst are those that have put all their eggs in one basket. Small investors excited by the bull market in February 2000 went as far as to take loans from banks to buy shares.

The fall in all international markets, most especially in the tech markets, has had a significant effect on the MSE. Unashamedly, some financial gurus have blamed the bear market on the statements of some government ministers.

This is not the case.

But back to the stock exchange and the investors. Foreign financial newspapers are loaded with analytical articles about the profits and ‘inaccurate’ advertising of many stockbrokers and advisory agencies.

Thankfully, the media abroad operates in a much larger environment and the pressures of stockbrokers and their companies is far less significant.

But in Malta it is rather different, when stockbrokers take their clients for a ride, the media cannot blurt out and speak up... for fear of losing out… on advertising.

But here at The Malta Financial and Business Times we have a different view.

We urge caution when investing on the stock exchange. Individuals with no extra cash should not risk all at the stock exchange. And those not willing to understand the mechanics of the stock exchange should not invest wildly.

More still, if one has no intention of risking, then the traditional investments such as stocks and bonds are much safer.

And as all those who have invested in property will say: conservative, old economy styled investment still works very well.

In no way are we advocating a thumbs down to the stock exchange. But equities are not for the weak hearted and those who aren’t willing to look at their investment in terms of five to ten years.

The ‘China factor’

The ‘China factor’ can no longer be ignored in economic terms. The dormant giant has over recent years embraced capitalist economic ideals and today Chinese citizens living in the large cities have a standard of living comparable to most industrialised nations, including Malta.

No country with a sensible economic policy can ignore China, more so a tiny island nuzzled in the Mediterranean sea that has seen its relationship with the red giant flourish for 30 solid years.

However, one thing cannot be ignored. In spite of the economic freedom that has taken root in China, the same cannot be said for human rights. Waving a Tibetan flag in China earns you an automatic five-year imprisonment. Normal crimes are punished with death penalties. Even more so, opponents of the ruling regime are silenced. China’s human rights track record is abysmal to say the least.

In such a scenario, it becomes ironic for a small country like Malta, which embraces human rights and regards them as an important value of the democratic ideal, not to voice its concern on the issue.

We agree that Malta must develop its relations with China. But not at the expense of substituting economic ‘value’ with human rights. The least we expected from our leaders during Jiang Zemin’s visit was to raise their polite concern on the atrocities perpetrated daily in China. The silence is deafening and ambiguous to our true nature.