Bond listing to deepen financial market—MSE
Malawi Stock Exchange (MSE) has said the listing of three government bonds—long-dated debt instruments— will not only add to the diversity of listings on local bourse, but also pave the way for increased introduction of other more innovative financial products in future.
The 14-counter local shares market listed the three bonds amounting to K109.2 billion on Monday in Blantyre at a ceremony attended by government officials, fund managers, transfer secretaries and stock brokers/dealers.
“In view of the prevailing dynamic and often volatile financial environment, this development is strategic in meeting the differentiated demands of investors for a broader range of financial products at more competitive prices and through more efficient and convenient channels,” said MSE chairperson Augustine Chithenga.
He said the listing of the bonds on the market will also raise awareness and generate interest of domestic and international investors in the country’s bond market, contributing towards the development of a deeper and broader bond market in Malawi.
The Malawi Government through the Reserve Bank of Malawi (RBM) issued two bonds in 2011 and raised K2.4 billion (about $4.8m).
In October this year, it also issued another bond amounting to K106.87 billion (about $213m). These are the bonds that were listed on Monday.
Chithenga said issuance and listing of government bonds is in line with MSE’s objective of providing an efficient and effective secondary market trading platform for financial instruments.
“What we are witnessing today is not only a testimony of the existing cooperation among the Ministry of Finance, Reserve Bank of Malawi and the Malawi Stock Exchange in the development and promotion of the capital market in Malawi, but also a confirmation of investors’ appetite for participation in capital markets in Malawi.
“The listing of the bonds is thus another major step forward in the development of the Malawian capital market and further enhances sustained and balanced growth of our economy,” he said.
Bonds are investment instruments with a low entry cost, 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 as well as an opportunity to diversify their investment into more asset classes.
Earlier, Minister of Finance, Economic Planning and Development Goodall Gondwe said government would issue promissory notes to contractors and suppliers owed K158 billion (about $316m) in arrears, adding the arrangement will enable those owed to discount the bonds with commercial banks to improve their liquidity.
The three bonds are four-year K1.5 billion bond with a coupon rate of 9.9 percent to mature in 2015, K822 million, five-year bond at 10 percent to mature in 2016 and K106.8 billion to mature in 2017 at the rate of 15 percent.
