MSE anchors financial markets, report shows

Malawi Stock Exchange (MSE) performance in the year has helped anchor the country’s financial markets placing the country among a few economies with resilient capital markets, the 2023 Africa Financial Markets Index (Afmi) shows. 

The country’s score however remained unchanged from the 2022 position at 49, according to Afmi which is a composite index that measures the level of development of the financial market in African countries against international standards and best practice.

The Afmi assesses a country using six pillars namely, market depth  which examines size, liquidity and depth of markets and diversity of products, access to foreign exchange, market transparency, tax and regulatory environment, capacity of local investors, macroeconomic opportunity  and enforceability of standard master agreements.

Prepared by Absa, a South Africa based financial services group, the report indicates that though Malawi fell short on other variables such as access to foreign exchange, market transparency, tax and regulatory environment, it did well in depth of markets but liquidity.

Reads the report in part: “The challenging global economic environment has hit most financial markets in Africa. The rising inflation, rising interest rates and geopolitical tensions have posed challenges to their domestic markets.

“These factors have all contributed to the decline in equity markets across the continent where on average, annual equity turnover as a share of market capitalisation fell to six percent in the 12 months to June, from 6.7 percent in the previous year. Malawi has however been an exception as market capitalisation has more than doubled and poised to continue rising.” 

Market capitalisation is the total market value of a company’s outstanding shares of stock. It is used by the investment community f to determine a company’s size and is equal to the market price per common share multiplied by the number of shares in issue.

Market analysts Bond Mtembezeka observed in an interview the local shares market has done remarkably well over the last few years showing resilience in the face of Covid-19 and a general domestic economic downturn hence the good ranking.

“That the marketing capitalisation is on the rise is thus expected and that has potential to attract foreign investors. However, more work has to be done to ensure that it is deepened further by courting new listings and developing innovative instruments,” he said. 

Over the past nine months, MSE has continued to defy the subdued economic environment characterised by high inflation and interest rates, recording a significant performance.

The development, which analysts have linked to the growing demand for shares and company performance, has ultimately pushed up the return on investment, a measurement of the gain or loss on an investment relative to the amount of money invested, to 90.90 as of the third quarter of this year. 

Similarly, stock prices have also registered significant share gains.

MSE operations manager Kelline Kanyangala, in an interview recently, also said the market is being anchored by a number of factors including performance of the listed companies, majority of which have posted an increase in profits or have issued trading statements stating that profits will increase.

She said: “The growth in the profits has subsequently led to demand on the counter leading to price gains. Further, a lot of investors are looking at the stock market as an avenue where they can preserve and create value for their investments in light of the macroeconomic developments.”

MSE presently has 16 counters with about 46.11 billion shares on issue and a market capitalisation of about K6.23 trillion.