Investment and portfolio management firm Alliance Capital Limited (ACL) has said lack of knowledge about the existence of the Malawi Stock Exchange (MSE) has rendered the local bourse stagnant over the years.
In its market review commentary for week ending October 26 2018, ACL observes that investment in the capital market has largely been the knowledge of a few middle-class urban dwellers with relatively high-end incomes.
This lack of awareness, it says, makes it difficult to even think of investing in the market. The idea of shares and the security they provide rarely crosses their mind.
“Most Malawians are not connected to the formal financial sector. For example, they do not have bank accounts, neither are they part of any formal financial institution.
“If they are not connected into the financial grid, they cannot mention shares. Transactions such as receipt of dividends, buying and selling of shares require bank accounts—something they do not have,” reads the report in part.
ACL said that while the return from shares is usually said to be relatively low as compared to other markets except for countries like South Africa, the good thing about the Malawian market is that it is not depressingly volatile unlike in foreign markets which are very vulnerable to speculation.
“The general slow growth of the Malawi economy has really impacted the way our stock market performs. Investors are individuals, companies and even institutions. Whatever business they are in, they have to be making money so that they can buy securities at the market. Without this, they will not participate.
“It is, therefore, important that those in charge of planning Malawi’s economic future should know that the effective functioning of some of the instruments is very dependent on meaningful economic performance.”
Available statistics from RBM indicates that MSE remains the smallest exchange in the Southern African Development Community (Sadc) region with a market capitalization at the end of 2015 at $1.3 billion, compared with $2.7 billion (Lusaka Stock Exchange-LuSE), $3.1 billion (Zimbabwe Stock Exchange-ZSE) and $4.5 billion (Botswana Stock Exchange-BSE). And its 14 counters are fated against 23 (LuSE), 32 (BSE), and 63 (ZSE).
The MSE is also the least liquid with 1 223 trades in 2015, compared with 3216 (LuSE), 8692 (ZSE) and 10863 (BSE).
As of last year, Malawi’s [gross domestic product] GDP was only $4.4 billion when that of Zimbabwe, Zambia and Botswana reached $14.2 billion, $27.1 billion and $17.2 billion, respectively. It should not be surprising, therefore, that the MSE still requires central bank support after 20 years in operations.
MSE chief executive officer John Kamanga recently conceded that despite the tremendous achievements and opportunities that have been created by MSE over the years, there is more that needs to be done if the exchange is to register vibrant growth.
“We are not satisfied with the performance of the MSE because we are still having few listed companies but we have more than 30 companies in the country who have the potential and capability to get listed on the MSE. We are engaging them on a daily basis and try to convince them to come and list on the exchange,” he said.