The Malawi Stock Exchange (MSE) 2016 negative performance on the back of harsh macroeconomic environment resulted in short-term investors making huge losses, local market watchers and shareholders have observed.
News over the last 12 months on major macroeconomic variables that have traditionally impacted on the local stock market such as high inflation rates, high interest rates and the depreciation of the local currency may have negatively filtered into MSE.
The Kwacha continued to lose value, shedding about six percent in the first half of 2016 and closed the year trading at about K730 to the United States dollar.
Interest rates have also on the other hand remained stubbornly high at more than 35 percent, making it hard for businesses to borrow and invest.
In the first quarter of 2016, the bourse registered a negative return on investment of 7.8 percent compared to 3.21 percent registered in first quarter of 2015 and a decrease in both traded volume and value.
The trend continued to the close of the year where the market recorded a decline in both total traded value and volume compared to the corresponding period, registering a 8.53 percent negative return on investment compared to 2.17 percent 2015.
Frank Harawa, a Blantyre resident with shares in most listed companies on MSE, noted that in this kind of scenario where the market has not performed well, short-term shareholders suffer most.
He said: “From what I observe, institutions and companies who usually invest for long-term purposes may not have been affected much by such developments on the market, but for individual investors who invest for short-term purposes, this is definitely a blow.
“Short-term investors unintentionally sell their shares due to desperate situations they find themselves in such as school fees issues. In the process, they end up losing their money since they sell their shares at a give-a-way price to sort out personal problems.”
Meanwhile, three out of the 13 listed counters namely NBS Bank, Nico Holdings and National Investment Trust Limited (Nitl) have forecast that their financial results for the period ending December 31 will be lower than the financial results of the previous corresponding period.
In the financial year ended December 31 2015, NBS Bank made a loss, this time it is expecting to drop further by 20 percent drop whereas Nico Holdings Limited profits will also plunge by 20 percent. Nitl profits will also be lower by 200 percent.
MSE operations manager Esnat Lweya remains optimistic that the local bourse is set for strong performance on the back of a stabilising macroeconomic environment.
“Even though the overall performance is not good, most companies reported positive performance in 2016, which means that if the investors invest in these counters, they would be able to earn a good return and from the trading statements that are coming through, most companies are expecting positive results,” she said.n