MSE to tap into idle pension funds
Malawi Stock Exchange (MSE) says it will diversify its product portfolio by establishing other investment avenues to tap into the growing pension funds.
MSE chief executive officer John Kamanga, in an interview last week, noted that there has been interest to invest on local shares market, but limited products has hindered such disires.
Assets for the pension sector have registered a 6.86 percent growth from K302.2 billion in September 2015 to K323 billion in the first quarter (January to March) of 2016, according to Reserve Bank of Malawi (RBM) latest economic review report.
Elsewhere, pension funds fulfil an important role in the economy by channelling the current pension savings into investments in financial assets, and subsequently, transforming these assets into a predictable post-employment income for many around the globe.
For instance, in countries such as South Africa, pension funds have been used to build infrastructure such as roads and buildings. Back home, Chichiri Shopping Centre in Blantyre and some buildings in the city were built by pension funds.
Kamanga said with the total contribution from pension funds standing at around K400 billion, with only 40 percent of which is in the capital market, MSE is geared to provide more avenues for investment of the funds.
“With the growing pension funds, we realise that there is huge demand on the market, which has seen product prices going up not because of the fundamentals of the company, but because the products are scarce,” he said.
Kamanga said since pension funds are on long-term basis, the 13-counter MSE, which is an avenue that offers that element of long-term investment, is working towards expanding its products to address the rising need for investment.
He said: “We are looking at bonds, which are also long-term in nature so as to capture the appetite from the pension funds managers.
“In the long-term, we are looking at exchange traded funds. Under this, we would come up with a product that is index linked. We would, for instance, link this to five top companies on the stock market based on which we would come up with a product backed by assets of the index of those five companies.”
Old Mutual Malawi acting managing director Edith Jiya, in an earlier interview, said it is key that there be alternative channels for putting pension funds to productive use and earn a competitive return for the fund members.
“What is critical for this to be successful is to ensure that such instruments are secure and give competitive returns.
“As the industry gathers these assets, it is critical that there are safe, adequate and productive avenues where such assets are productively deployed for the benefit of the pension fund members,” she said.
A market analyst, Nelson Mkwende, who is also manager at FDH Stockbrokers, in an interview challenged market analysts to play a part in attracting investors to existing investment avenues such as the Alternative Stock Market, which has since its inception, six years ago, not listed any entity.
