The recent changes on the countryâ€™s economic front have improved the outlook of the Malawi Stock Exchange (MSE) and perked up the attraction of Malawi as an investment destination.
MSE chairperson Augustine Chithenga said this on Monday at the launch of the Central African Stock Exchanges (Case) handbook that has been sponsored by FMB, one the countryâ€™s commercial banks.
Chithenga cited the 49 percent devaluation of the kwacha against the US dollar and its subsequent floatation effectively making the local unit rate to be determined by market forces of demand and supply.
He said for the past three years, the local shares market has been on the downward spiral mainly because foreign investors were unwilling to invest in a country with a fixed exchange rate regime.
He said following the devaluation, Malawi is now the cheapest market in the region and possibly in Africa.
Commenting on the 2012/13 fiscal budget presented last Friday by Minister of Finance, Dr Ken Lipenga, Chithenga hailed the pro-market move in the budget regarding capital gains tax on investment securities.
“We welcome this as another move towards restoring Malawiâ€™s international competitiveness. If the current momentum to change the political governance can be sustained, this will certainly improve our countryâ€™s goodwill.
“With settlement being reached with the International Monetary Fund (IMF) on balance of payments support, we should expect foreign investors to follow,” said Chithenga.
Chithenga pointed out that in 2011, MSE saw the value of its traders more than triple in dollar terms, mostly because of portfolio re-organisation.
“The year 2011 was not a total loss for us in that the MSE saw the value of its trades more than triple in dollar terms largely due to portfolio re-organisation. While the Malawi All Share Index (Masi) recorded a slight gain in kwacha terms, it ended the year lower in dollar terms and at a significant loss if the market related rate that prevailed at the end of the year were to be used. But that was 2011 and things will certainly be different in 2012,” he said.
FMB executive director Sean Oâ€™Neill said the fact that the kwacha exchange rate will be market determined is comforting for potential foreign investors.
He also observed that if government contains its appetite for domestic borrowing, there is likely to be more interest in the MSE from domestic investors.
Oâ€™Neill also commented on the restoration of exemption from taxation of gains on sales of listed shares held for one year, saying it will restore the lost competitiveness of the MSE.
“I must confess, however, that I have never understood the rationale for one year as opposed to any other particular period â€“ why not exempt gains full stop rather than legislate magic numbers? In fact, the real glaring omission in our tax legislation is the absence of rollover relief for re-investment not just in listed shares but any capital asset,” said Oâ€™Neill.
On the Case handbook, he said FMBâ€™s sponsorship of the provision of information would help stimulate investment in the country.
The handbook profiles 130 companies in the region and provides a snapshot of their activities. For each of those companies, it covers the most recent financial results, the share price performance and volumes traded in 2011.
It also takes a look at the prospects in the year ahead. The publication is now in its second year.