MSE woos firms on bond listing

says it is upbeat on new corporate bond listings once companies fully embrace the concept.

MSE operations manager Esnat Suleman said in an interview yesterday that the local bourse has been meeting various companies to raise awareness on public issuance of a corporate bond—a bond issued by a company to raise finances for a variety of reasons.

So far, New Finance Bank (NFB) is the only corporate that issued and listed a three-year K14 billion corporate bond in July.

Said Suleman: “We believe that this will give confidence to other corporates that it can be done. Corporate bonds attract lower interest rates compared to commercial lending rates and businesses can take advantage of this.

“It is, therefore, just a matter of embracing the concept and implementing the same.”

She said NFB has provided empirical evidence that rates are lower for listed corporate bonds and that the implementation costs are also low.

Market analysts say the country’s corporates could benefit from issuing bonds if they take the 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 market.

Market analyst Armstrong Kamphoni said while it is arguably cheaper to list bonds on the stock market, firms are failing to come forward because of misconception.

“First, we need to conduct more awareness so that companies are aware of these offers and they can embrace them. But again, corporate bonds offer finance at low interests, but other players might be shunning this because we have had previously unstable economic environment, which meant unstable rates,” he said.

Kamphoni said there are investors who feel that corporate bond listing is expensive as they are supposed to hire a transaction adviser, sponsoring broker and a legal adviser.

“But if you compare this to direct bank loan, which most of these companies are currently opting for, this one should be much cheaper,” he said.

NFB issued its first ever private corporate bond on MSE in July, a development which the bank’s chief executive officer Zandile Shaba said signifies the bank’s desire to participate in the development of the financial market in Malawi.