Minority shareholders of Malawi Stock Exchange (MSE)-listed firms have expressed worry over share value losses on some counters, saying it is eroding the gains made in recent times.
Minority Shareholders Association of Malawi secretary general Frank Harawa said in an interview on Thursday that the development has cost shareholders as the shares market is becoming a less attractive investment avenue.
“Most of the shareholders got loans to buy shares in various counters on the MSE. Now that share prices are losing value, we are forced to settle the loans with money from other avenues instead of settling the same with dividends that we could have ideally been getting,” he said.
With most shares on the MSE trading below a dollar, Harawa said shareholders are particularly concerned with the declining capital gains.
“Volumes are high on the market, but they are going at a cheaper price.
Presently, gains have dropped to around 10 percent from over 30 percent.
“Companies such as FMB Capital Holdings are now trading at almost half of what they were trading last year which is very worrisome for us. This is a clear indication that we are not getting the most of the MSE,” said Harawa.
MSE Third Quarter Market Report for 2019 indicated that the shares market gave a negative return on index of –1.37 percent or 3.74 percent in dollar terms compared to 5.32 percent or 4.95 percent in dollar terms in Q3 2018.
This was on the account of share price losses registered by counters notably Sunbird, TNM, FMBCH and National Investment Trust Limited by -14.49 percent, -010.31 percent, -5.88 percent, and -0.01 percent, respectively.
Market analysts are not surprised with the drop in share prices, particularly in an environment where interest rates are declining.
They say the decline in interest rates has had an impact on the 14-counter MSE as it opened investment alternatives, arguing that with the lower interest rates, investors opt for other investment avenues, leaving demand for shares for most of the companies at a minimal.
During the quarter, commercial banks’ interest rates also inched downwards from around 16 percent to an average of 13.5 percent and the kwacha stabilised against major trading currencies.
But MSE chief executive officer John Kamanga, in an interview, said the share price drop should not be a cause for concern, adding that it is a normal occurrence that the market experiences.
“At this time of the year, people panic with a number of things such as preparing for the growing season while others sought for fast cash to use for the school season.
“This pushes investors to offload shares at any given price in search for fast cash,” he said.
During the first annual general meeting of Icon Properties plc last month, the company’s board director Vizenge Kumwenda admitted that there has been minimal information of the company, a development that may have kept the firm’s share price at a lower value.
He said Icon board will work on marketing the company, raising hopes that the firm’s share price would rise.
As half-year results for listed counters trickle in, some are indicating good results while performance for others is subdued.