Malawi Stock Exchange (MSE) and market players have expressed optimism that the local market is set for strong performance on the back of a stabilising macroeconomic environment.
In the recent past, Malawi experienced the ever worsening and volatile exchange rates, high inflation rates and, prohibitive lending rates.
But news over the past few months on major macroeconomic variables that have traditionally impacted on the local stock market such as falling inflation, interest rates, retreating treasury bill rates and a projected stable kwacha have positively filtered into the MSE.
For instance, inflation and interest rates have been on a downward trend declining by 9.7 percentage points from 24.3 percent in July 2016 to 14.6 percent as of April and bank rate now at 22 percent.
The kwacha has, on the other hand, remained stable since December last year trading at around K734 to a dollar.
In an interview on the sidelines of a meeting with the business community on Monday, MSE chief operations officer Esnat Chilije urged the private sector to take advantage of the stock market as a capital raising tool, saying current economic underpinnings are good for MSE as well as investors.
“We feel that with the economy picking up, issues of profit history will not be a problem anymore for most companies and even in terms of potential investors into those companies because the economic wellbeing of investors will improve, which will create demand for investment,” she said.
Chilije said raising capital through the stock exchange eases the burden of adding that the cost of raising capital on this platform averages around six percent which is significantly lower than lending rates on the market.
Weighing in, one market analyst agreed with Chilije, saying the current economic status is a positive development to the stock market.
“We have seen rates decreasing in the recent months. This is time for investors to shift their money from money market to capital market where the investment is more futuristic,” said the analyst.
Elsie Munthali of Horizon Health said at the moment their company is consolidating its processes but views the stock market as an interesting avenue that they can pursue in the near future.
Minister of Finance, Economic Planning and Development Goodall Gondwe told Parliament recently that the economy will in the 2017/18 fiscal year register an increased growth rate of between 5-6 percent depending on good weather conditions.
He also projected that inflation rate and interest rates will continue to drop adding that the exchange rate will remain stable and that export proceeds reserves are likely to even surpass the three months import cover by the end of this financial year.