Malawi Stock Exchange (MSE) return on investment (RoI) in 2019 dropped to four percent from 34.17 percent the year before, dealing a heavy blow to shareholders of listed firms.
RoI measures the gain or loss on an investment relative to the amount of money invested.
In an interview on Monday, Stockbrokers Malawi Limited chief executive officer Noel Kadzakumanja blamed the development on the tension that followed the May 21 Tripartite Elections, saying it resulted in temporary loss of confidence in the market despite a positive outlook in the long-term.
“This could be that investors are anxiously waiting to see the electoral dispute concluded before they can get more active again on the stock market. We, however, are still optimistic that the market will perform better this year,” he said.
Bridgepath Capital Limited chief executive officer Emmanuel Chokani observed that the business environment in 2019 was difficult and the stock market was not spared.
He said “Coupled with the political impasse, things just worsened such that Masi [Malawi All Share Index] was just minimal until November and only rising to 4.38 percent in December when some counters picked,” he said.
But Alliance Capital Limited research manager Bond Mtembekeza blamed the poor performance of the stock market on the mismatch between demand and supply.
He said offers outpaced bids, adding that most investors, especially retail investors, were unwinding their positions at a discount.
Mtembekeza noted that most companies did relatively well in their lines of business; hence, it should be expected that dividends will be paid and investors will not entirely lose out.
Minority Shareholders Association of Malawi secretary general Frank Harawa said on Monday that the drop in return on investment is a serious concern for shareholders.
“Malawi’s shares market is already small and not many people understand it. The current development therefire demoralises shareholders, especially those that bought shares in 2019 for the first time.
“What is happening clearly indicates that shareholders are suffering huge losses. It, however, gives us relief to note that the problem is not entirely linked to poor performance of local companies, but general business environment. With that, we are only hopeful for a better year ahead,” he said.
In the just-ended year, the local shares market was largely in a negative territory.
In November for instance, the 14-counter shares market registered a negative return on index of 3.74 percent despite registering an increase in both volume and value of traded shares.
This was evident in the downward movement of the overall measure of market performance from 30 344.49 points registered in October to 29 215.33 points in November 2019. But MSE chief executive officer John Kamanga is optimistic that market performance will improve this year, banking hopes on new listings which he believes will deepen the market and increase trades and volumes.