MSE capitalisation plunges 39%

The 49 percent devaluation of the kwacha in May took a toll on the Malawi Stock Exchange (MSE) in the second quarter (Q2) of 2012 as market capitalisation fell 39 percent in dollar terms.

An MSE market performance report released on Friday explained that in dollar terms, the local bourse’ market capitalisation dropped to $10 million in the second quarter from $16.4 million at the beginning of the quarter in April, representing a loss of 39 percent.

The market’s value includes the non-Malawi registered Old Mutual plc (OML) shares at London Stock Exchange (LSE) and Johannesburg Stock Exchange (JSE).

But, at the same time, the market value in kwacha terms has increased from K2.4 billion at the beginning of April to K2.7 billion, a 12.5 percent jump.

Comparatively, market capitalisation in the second quarter of 2011 was at $15.5 million in US dollar terms and K2.3 billion in Malawi kwacha.

MSE head of operations John Kamanga said in an interview yesterday that the devaluation of the kwacha and its subsequent floatation on May 7 has affected the local shares market’s capitalisation in US dollar terms.

“The relative value of the market has gone down. Foreign portfolio investors have lost out because the value of their investment is less than what it was in April,” said Kamanga.

But he said some counters have experienced a gain in shares in kwacha terms.

Market analysts have, however, said the devaluation of the kwacha has made the stocks to be cheaper by 33 percent in US dollar terms.

In the period under review, the local bourse registered a positive return on index (RoI) of 5.58 percent in the second quarter (Q2) of 2012, which is higher than the 1.12 percent recorded during the same period last year.

But report said the local bourse, however, recorded a drop in both traded volume and value in the second quarter 2012 compared to second quarter 2011.

“In US dollar terms, the index shrunk by 36.07 percent because of the devaluation of the kwacha on May 7 2012 by almost 49 percent,” said the report.

A market analysis report from Alliance Capital Limited noted it would appear there is little local appetite for equities at present, but there is an anticipated vibrancy once foreign investors return to the market.

The firm sees a bullish outlook for the local bourse this year.

But it said that can only happen once a good measure of confidence in the country returns following the wide-ranging changes implemented by the new administration and the passing of the budget.

Government has, in the 2012/13 budget, removed the Capital Gains Tax on the sale of shares held for more than one year.

According to the report, the positive RoI is reflected in the upward movement of the Malawi All Share Index (Masi), the measure of market performance, during the period. Masi moved from 5 667.12 points registered in April to 5 983.34 points registered on June 30 2012.

The price gains registered by nine counters, Illovo Sugar (Malawi) Limited, National Bank of Malawi, NBS Bank, Nico Holdings Limited, National Investment Trust Limited (Nitl), Press Corporation Limited (PCL), Standard Bank, TNM and Old Mutual plc (OML), were the major drivers in the upward movement of the Masi.

This was buoyed by an increase in both the domestic share index (DSI), the measure of domestic shares counters by 5.49 percent and the foreign share index (FSI), anchored by counters, OML, by 13.29 percent.

During the period under review, 309.7 million shares were transacted, raising K1.157 billion (S$4.7 million, at the official exchange rate) in 290 trades.

Comparatively, in 2011, the market transacted 716.7 million shares, raking in K1. 590 billion ($10.5 million) in 338 trades.

This reflects a -56.78 percent decrease in terms of share volume and a -27.24 percent (-54.70 percent) in US dollar terms) decrease in share value.