Malawi Stock Exchange (MSE) says talks are at an advanced stage with a privately owned company to list a corporate bond on the local shares market saying the move signifies the change of perception of investors towards the stock market.
MSE chief executive officer, John Kamanga said the development which is an outcome of the workshops held last year by the stock market to woo investors in the market is not only good for the stock market but the investors as well.
He said the country’s corporate could benefit from issuing bonds if they take bond market as home for investment to raise funds to finance their infrastructural developments.
But over the years, MSE has been facing difficulties to attract firms to list on the stock market as well as entice companies to issue corporate bonds that can be listed on the stock market.
MSE admitted that although eligible to issue bonds and list on the stock market, corporates have shown little or no interest in the bond market.
This according to MSE operations manager Esnat Chilije is on account of several factors key among which are governance issues, transparency issues, structure of companies but also the fear of unknown.
But, Kamanga said companies should take precedence of the company which is currently in talks with the shares market by joining in to issue bonds or even list on the market.
He said corporate bonds will give companies an upper hand in raising capital at a relatively cheap cost through long term financing which can be taken through long term bond issuance unlike the short term.
“Instead of going short term, companies should be going long term which means there will be less pressure in terms of repayment period. On a short term the repayment period is usually one year but on a corporate bond people may have five year or 10 year bond which has less pressure on repayment period and gives room to have more efficiency in operations and have more cash in meeting operational capacity. In so doing, increasing profitability and performance of the company,” he said.
He said meanwhile, the stock market is reviewing the company which is looking to raise a reasonable amount through the market and will in due course list the bond on the stock market.
Bonds are investment instruments with low entry cost and highly efficient, transparent and convenient investment tools designed to appeal not only to institutional, but also to retail investors.
With an affordable standard lot size, bonds also provide an avenue for retail investors to have access to the bond market, offering investors an additional investment alternative and opportunity to diversify.