The Malawi Stock Exchange (MSE) has described the K5 trillion slide in its value over the past year as a market correction following a historic 248 percent return in 2025.
MSE chief executive officer John Kamanga said in a written response at the weekend that investors should not be concerned by “short-term fluctuations”.
However, this position by the bourse is contested by economists and market analysts who have argued that the rout is a reaction to fiscal and regulatory measures now transmitting from quoted wealth to household spending, small-trader sales and jobs.
By close of business on October 22 2026, the market was worth K27.04 trillion, down from K32 trillion a year earlier and about K33 trillion at end-2025, MSE reports analysed by our sister newspaper Weekend Nation show.
The Malawi All Share Index had fallen to 485 486.63 points from 591 103.33 points, down 17.9 percent year-on-year and 18.8 percent from its end-2025 peak.
cause for concern . | Nation
In reaction, Kamanga said: “The market continues to experience a correction subsequent to the performance registered in 2025, where it recorded a historic return of 247.63 percent.
“The supply of shares has been high compared to demand. The situation has been exacerbated by suppressed demand from pension funds which are aligning their portfolios with the new directive that limits exposure to listed equities.
“We usually emphasise that the stock market is for long-term investments and for those that hold such a horizon, short-term fluctuations are not a cause for concern.”
His framing is directly contested by the Minority Shareholders Association of Listed Companies (Misalico).
“This is not a market correction. It is a market reaction to a package of fiscal and regulatory measures that are strangling it,” Misalico general secretary Frank Harawa told No Excuses, a Nation Online podcast, on Thursday.
At the centre of the debate are three measures: unclear terms for debt restructuring, a two percent tax on gross proceeds from share sales introduced in the 2026/27 National Budget and a 60 percent ceiling on listed-equity holdings for pension funds and insurers.
Domestic debt accounts for about 65 percent of the country’s K24 trillion total public debt, which the World Bank and International Monetary Fund have declared unsustainable and have told Capital Hill to restructure it. Total public debt is about 90 percent of gross domestic product.
Treasury is yet to clarify whether domestic securities will be included in the restructuring and whether it will mean lower coupons, deferred payments, longer tenors or a principal write-down.
Investment analyst Benedicto Nkhoma told Weekend Nation that while the sustained slide reflects a valuation adjustment after last year’s strong gains, most of the devastating losses stem from sovereign debt concerns, pension portfolio rebalancing, tax changes and liquidity pressures.
“Limited buying demand on a relatively shallow market magnifies selling pressure. Investors are reassessing the sustainability of future earnings and dividends, even where current profits remain strong,” he said.
Nkhoma said the tax is particularly punishing for those forced to sell to meet urgent cash needs.
He said: “For someone facing an urgent medical or school bill, ‘hold for the long term’ offers little comfort. Assuming the stated two percent tax applies, selling a K10 million investment for K8 million leaves K7.84 million before fees—a loss of 21.6 percent before transaction costs. The sale crystallises the loss; the tax deepens it.”
Nkhoma warned that repeated experiences of losses, illiquidity and tax on loss-making disposals could drive retail investors away, adding that defensive value lies not in a falling price alone but in strong capital, manageable debt, recurring cash flow and sustainable dividends.
Economics Association of Malawi (Ecama) president Bertha Bangara-Chikadza said in a separate written response that the combination of uncertain debt terms and the 60 percent ceiling is accelerating sell-offs because pension funds and insurers hold large amounts of both government securities and listed equities.
“When these institutions become uncertain about how the debt changes will affect them, they sell shares to raise cash and rebalance their portfolios,” she said.
Bangara-Chikadza, who teaches economics at the University of Malawi, said other associated factors include elevated inflation and tight monetary policy, which have increased returns on government securities such as bonds.
“Persistent foreign exchange shortages and high institutional operational costs have also contributed to the drop in the MSE market as institutional income margins cannot sustain operations. This suffocates investor confidence and results in unrealised equity losses, such as the K571.6 billion booked across pension portfolios,” she said.
Bangara-Chikadza argued the K5 trillion erosion has real economy effects.
“For both households and institutional funds, the eroded K5 trillion in market capitalisation reduces outstanding money in account balances and money reserved for pension funds, leading to a negative wealth effect that reduces disposable consumer spending as well as retail sales for small traders,” said the Ecama chief.
“It becomes a critical concern when institutional investors experience liquidity problems and fail to operate, which forces them to reduce capital expenditure, delay supplier payments and reduce the workforce.”
Bangara-Chikadza said government should publish clear debt restructuring terms, temporarily ease the 60 percent ceiling to stop forced selling, and review the two percent tax so that only actual profit is taxed.
However, Kamanga defended both measures. On the ceiling, he said its intention is to limit concentration in equities and create space for financing other sectors, especially infrastructure.
“What is important is for infrastructure project sponsors to have in place bankable projects which are capable of attracting pension funds and indeed other financiers,” he said.
On the tax, Kamanga said it was a compromise after government initially proposed a 30 percent capital gains tax.
“Through our engagements with government, the capital gains tax was removed and instead a capital gains levy of two percent is now applicable… This offers a more balanced outcome,” he said.
For Harawa, the human cost is being overlooked. He said those exposed are not only active traders but pensioners, teachers, nurses and other workers whose pension contributions or personal savings are invested directly or through funds.
Scotland-based economist Velli Nyirongo agreed that while the K5 trillion erosion is not cash withdrawn from the economy, it has direct implications.
“As pension funds record unrealised losses, households may feel poorer and become more cautious about spending. Businesses can also face weaker demand, particularly small traders whose sales depend on household purchasing power,” he said. “These paper losses become a real economic problem when they undermine confidence, reduce investment and constrain companies’ ability to raise capital for expansion and job creation.”
Commenting on the exchange’s role, Kamanga said the focus remains growing the market through new listings and monitoring secondary trading.
“Market volatility is a natural and expected feature of stock market operations. It should not automatically be interpreted to mean something is wrong,” he said.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha said it would be inappropriate for him to comment at this stage on whether he will review the measures in the Mid-Year Budget Review next month.
