Treasury’s hope of boosting trading on the 13-counter Malawi Stock Exchange (MSE) and promoting financial assets diversification for investors is failing materialise.
This follows the lukewarm response from investors particularly on the listed bonds, a situation market analysts attribute to the nature of investors.
Treasury has over the past months listed three bonds worth K28 billion to restructure its huge domestic debt.
These are two-year K20 billion bond listed on October 9 2017, two-year K5 billion bond and three-year K3 billion bond listed on February 26 and March 12 this year, respectively.
At the time of the listing, analysts and MSE officials said the bonds would provide diversity of products where investors have the opportunity to either list in equity as well as treasury notes while at the same time providing a wide spectrum of instruments they can invest on.
Analysts said more institutional investors were participating on the equity side, which saw MSE registering 62 percent return on investment (ROI) at the end of 2017, which was higher than the real ROI when inflation, which was then at around eight percent, was factored in.
Market analyst Armstrong Kamphoni said in an interview that while it is a good idea to have the bonds listed, the challenge has been to trade them because when they were being listed, institutional investors had already subscribed to the bonds.
He said: “In most cases, these [investors] are pension funds and pensions funds hold on to maturity [period], they don’t sell. So, the challenge is for us to create trading activity on these bonds, but it is a good start the Reserve Bank of Malawi [RBM] came to list these bonds.
“We are in discussions as brokers to find a way to bring more trading activity as this is the only way to make them more liquid so that others can buy and sell as we have not seen that trading activity since the bonds were introduced.”
MSE operations manager Esnart Lweya said there has not been activity on the bonds because they have been subscribed by long- term institutional investors.
She said: “We have not had any secondary trading, but we feel that this is because of the shareholding that is there in the bonds; those who invested in the primary market are mostly institutional investors who normally invest long-term; hence, no secondary trading.
“Going forward, we would want to have more secondary trading of these instruments. There are some initiatives we are undertaking together with RBM such as training market players on how they can price these instruments on the secondary market. We hope that can help.”
Prior to the listing of the bonds, Treasury had also issued two K20 billion bonds, but failed to attract positive response from the investing public.
Investors have always been skeptical to invest in long-term treasury notes as the risk remains high.
In an earlier interview, RBM market developments manager Franklyn Khoza said the listing of the bonds is part of the market development initiative to diversify investment on the capital market.