In the three months since June 27 the share price of Deutsche Bank, Germany's largest bank, has risen over 22%. This is in marked contrast to its performance over the three-year period up to that date, when its performance rating ranked only 126 out of the S&P 350 with a negative total return of -10.6 %.

The Deutsche Bank share price has been moving upward and downward over the past ten years, but the overall rise was considerably more than 100%. How did Deutsche Bank achieve this dizzying rise over these last three months, when it had laboured so long in the doldrums?

Also, could the Maltese investor have profited directly from this stupendous rally? How far, and in what usually reliable literature was it forecast?

How can the Maltese organise themselves to make use at first hand of such an opportunity, and not by buying into expensive bank funds? During these last three months we have seen spectacular rallies of STMicroelectronics, BHP Billiton, Nokia and that even more powerful rise of Deutsche Bank.

This rally can be expected to extend along with the highly probable transformation of the German economy, after the general election. Such rallies can be easily monitored from quality financial literature, and other mass media available in Malta.

If a number of Maltese investors put up a million they can easily trade it, and not just invest it, with the help of a bank like Deutsche Bank. In this way expensive commission fees can be avoided, as they become negligible.

The main cause

The main cause behind the rally of the Deutsche Bank share price has been undoubtedly the expected changes, which are bound to materialise after the German elections.

Philip Manduca, the well-known British financier, who boasts about his Malta connection, was questioned on this point on CNBC. He was asked whether the present socio-economic picture of Germany could remain unchanged after the election.

His answer was that Germany could not remain forever a labour high wage area when it had countries on its eastern border where labour was equally highly educated and prepared to work for much lower wages.

Mr Manduca could have added that car manufacturing in Germany was bound to migrate to such countries as Poland and Romania unless there was a scaling down of restrictive labour laws.

This has already happened with Fiat, which will be manufacturing cars in Poland in partnership with Ford. Yet the German labour movement is far more financially effective and sophisticated than the British one tamed by Margaret Thatcher.

German co-operative banks

The defeat of the German Left will bring an inevitable decline of that country's admirable co-operative bank movement. It will take time to delineate the exact character of that defeat.

Co-operative banking has given the country great social stability at it has provided socialism with enormous power and prestige. It has helped economic development and kept away the evils of national socialism and communism but it was far from being dynamic in a productive way.

The German co-operative bank movement has absorbed a third of the deposits of the country. It is inevitable that money in the hands of a trade unionist has not the multiplying power when it is in the hands of a Weill and a Zarb, who together founded Citigroup, the world's largest bank.

The fact that Deutsche Bank has a return on total equity of only 9.5%, when that of ABN Amro is an astonishing 27.2%, speaks volumes about the fact that the co-operative bank movement in Germany, with its power of absorbing the deposits of the labouring masses, has been instrumental in giving Deutsche Bank only 15% of German banking. This bank has only maintained its world position by earning money for its shareholders by extraordinary investment services all over the world.

There are signs of a massive fall in the prestige of trade union activity in German. This will inevitably pull down the co-operative bank movement in that country. We learn from the international media that the words "trade union leader" have come to draw ridicule and opprobrium among the masses, as it has been the trade unions that have brought about the present international economic humiliation of Germany, the greatest exporter of the world economy - yet with 10% unemployment!

I know at first hand of the power and reach of the German co-operative banks, having had direct experience of how post-communist Russia is seeking to imitate the German co-operative bank movement, which is certainly not as productive as capitalism but which has a lot to teach the bankers of the ex-communist countries.

It can at least can teach them how massive corruption can be avoided if it cannot teach them much about cost-cutting and the elimination of an excessive army of clerical workers. The German co-operative bank movement has served a great historical end, but what Germany now needs is venture capital banks, which would create a Silicon Valley and launch the country into the vanguard of world technological development.

These banking tasks can only be performed by bankers having a scientific education, such as those whom our Professor Joe Bannister used to teach in his chemistry classes at Cranfield. These, after graduating as scientists, later embarked on a venture capital career.

Modern banking needs hard-bitten scientists and not voluble trade unionists. Volubility may be harmless, but it is not the ability required to finance and monitor scientific discoveries, which are the very basis of venture capital.

A venture capital movement in Germany can only be financed by a bank like Deutsche Bank. Germany must increase its financial sophistication; it cannot live by being predominantly a manufacturing country.

Aggressive investors

Recent aggressive investment in German blue chips is the fundamental behind the dizzying dance of Deutsche Bank shares, all movements stemming from the widespread belief among analysts that Germany is proving that it is reformable - and that once again it can become formidable.

There are signs that German labour is understanding the changed world labour situation: that China has effectively doubled the world labour force; and there is no putting down the fact that it accounts for 60% of US trade.

German business is on tenterhooks and quite alarmed at the comeback which Gerhard Schröder made in the last elections. This comeback will not stop Deutsche Bank's advance. The fundamentals of a failed economic policy will not be bucked by temporary uncertainties surrounding CDU leader Angela Merkel's bid for power.

The present price is in the mid-70s. These are forecasts that can be ignored only at the cost of a possible financial loss on the part of the investor. German business might be on tenterhooks but international banks see Deutsche Bank's advance as ending in a spectacular forward leap.

No fewer than 26 analysts speak of a buy, nine of a hold and four of a sell. UBS gave the price target of Deutsche Bank on September 15 at E92, Merill Lynch at E94 (on September 5), and ABN Amro at €90 (on September 28).

John Azzopardi Vella advised Standard & Poor's and promoted the Malta Development Fund. At present he is executive manager with DBR Investments. E-mail: johnazzopardivella@hotmail.com.