Share prices of five Malawi Stock Exchange (MSE)-listed commercial banks continue to tumble in a move analysts have described as a “market pullback” with some investors cashing in on high-valued stocks.
An analysis of market data shows that between October 1 and November 24, Standard Bank plc stock price declined by 44 percent from K6 468 to K4 489 whereas that of NBS Bank plc dropped by 2.6 percent from K1 024 to K998 and FDH Bank plc share price eased by 0.1 percent from K637.89 to K637.13
Similarly, shares for FMB Capital Holdings, which owns First Capital Bank and National Bank of Malawi (NBM) plc shares, whose rally continued in the first month of the last quarter, have started also declining.
FMB Capital Holdings Limited lost 6.6 percent in a single day trading on Monday and the share price settled at K3 399 from K3 641 while NBM shares dipped by 0.008 percent from K12 400 earlier in November to K12 399 as of Monday this week.
Apart from the banking, telecommunications, property and financial sectors also registered similar fate in November, with only the tourism sector anchored by Sunbird Tourism plc and Blantyre Hotels plc becoming two of the three companies registering share price gains in November.
Apart from the three gainers, which also include Old Mutual plc, only Illovo Sugar (Malawi) plc was steady at K2 330 per share while the other 12 counters registered share price drops, signifying a terrible moment for the market that recorded record share price rises earlier this year.
Over 30 million shares have been transacted between October and November, according to MSE market data, with investors making over K26 billion.
Analysts say the situation denotes investors willingness to cash in on the highly valued stocks.
In an earlier interview, Cedar Capital Limited chief executive officer Armstrong Kamphoni said the performance of the market is in line with the analysis they conducted mid this year, which projected an imminent market pullback, where overpriced stocks are realigning themselves.
He said the market was ‘overbought’ based on surging share prices and price to earnings (P/E) ratio in third quarter.
Kamphoni said share prices of the five banks jumped considerably high between January and September this year, raising their P/E ratios and the market’s average P/E ratio to K42.57 for K1 of earnings on the bourse.
Said Kamphoni: “MSE’s weighted average P/Es on September 10 2022, 2023, 2024 and 2025 were K13.75, K21.92, K18.89 and K40.45, respectively.
“This means that K40.45 is significantly out of the historical range. Currently, many investors are wondering whether based on the P/Es, the MSE is now overbought.”
Stock market investor Benedicto Bena Nkhoma said in an interview on Tuesday that the drop in shares is not surprising as the market is correcting itself in terms of prices.
“This could signal a correction on the counters that had gone very high when you consider the historic price-to-earnings ratio,” he said.
However, Nkhoma is optimistic that when companies start releasing trading statements in the next few days, there will be a change in the trajectory of the promising stocks.
Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa said in an interview on Tuesday that after the significant capital gains recorded in recent months, many investors chose to realise profits, perceiving that some stocks were trading at elevated levels.
He said: “This selling pressure contributed to the share price declines across banks and other sector from October.
“The movement may, therefore, reflect a combination of profit-taking, tighter market liquidity and cautious investor sentiment regarding the current valuations of these counters.”
Financial expert and stock market investor Brian Kampanje said the significant fall of Standard Bank plc shares was prompted by oversupply of shares as significant number of minority shareholders wanted to cash in after the share split in July.
“The shareholders were willing to accept lower offers and this will enable the purchasers to experience massive gains in the future. This is how a perfect stock exchange operates,” he said.
MSE chief operations officer Kelline Kondowe declined to comment on the developments, saying the local bourse prefers to let the market analysis being left to stakeholders such as stockbrokers and capital markets analysts.
But she is quoted as having hailed the market’s recent strong performances as the sign of its strong potential.
