Malawi Stock Exchange (MSE)â€”listed companies continue to suffer the negative effects of the 49 percent kwacha devaluation and its subsequent floatation in May.
This has resulted in a 2.8 percent drop in market capitalisation in US dollar terms in the third quarter (Q3) of 2013, to $9.7 million (K2.9 billion) at the end of September from $10 million (K2.7 billion) at the beginning of July, according to the market performance report.
MSE operations manager John Kamanga confirmed to Business News on Thursday that the local shares market is suffering from the effects of foreign exchange liberalisation which has seen the kwacha depreciation by 7.6 percent in Q3 [Julyâ€”September], thus, a market capitalisation increase in kwacha terms.
â€œThe relative value of the stock market has gone down. The decrease in share prices in some of the traded counters have contributed to the reduction in the market capitalisation,â€ explained Kamanga.
However, the decrease in the market capitalisation in Q3 has been minimal as compared to second quarter (Q2) [Juneâ€”August] of this year in which the value of the market fell by 39 percent to $10 million from $16.4 million at the beginning of the quarter.
According to the market report, price gainers in Q3 were Old Mutual plc (OML), Standard Bank and Press Corporation Limited (PCL).
But the gains in the three counters were not enough to offset the losses in five counters, FMB, Mpico Limited, NBS Bank, Sunbird and TNM plc; hence, a negative return on index of 8.25 percent in dollar terms reflected in the decrease in Masiâ€”the overall measure of the market performance.
The Foreign Share Index (FSI)â€”anchored by one foreign counter, OMLâ€” registered a return on index of 5.77 percent.
In Q3, according to the MSE report, 257 million shares raised K1.2 billion ($3.1 billion) in 176 trades.
Comparatively, in 2011, the market transacted less shares at 91.3 million raising K470 million ($2.9 million) in 335 trades, reflecting a 181 percent increase in share volume and a 156 percent increase in value.
The recent increase in the bank rateâ€”the rate at which commercial banks borrowing from the central bankâ€”to 21 percent has triggered a shift of attention for some investors from the shares market to the money market where rates are hovering at around 24 percent, according to analysts.
â€œThere is indeed a decrease in the appetite [by investors] on the stock market. Investors are being attracted by the shorter gains on the money market, but the stock market is still a preferred source of investment in the long term,â€ said Kamanga.
The local equity market has 14 listed counters with over 23 billion shares on issue.