Shares demand, firms’ Profits boost market

Stock market analysts say demand for shares and the good performance of Malawi Stock Exchange (MSE)-listed firms has brought good tidings on the shares market despite the subdued economic environment characterised by high inflation and interest rates.

The development has pushed up the return on investment (RoI), a measure of profit gained from an investment, by 338.39 percent within one year.

Cedar Capital Limited chief executive officer Armstrong Kamphoni said in an interview yesterday that the positive trading statements relating to 2022 year-end performance and demand for shares is pushing up activity.

He said: “Individual investors have been largely responsible for the rally in the stocks as opposed to institutions who are generally cautious of market price increases.

“The result has been an increase in on-boarding of new investors, resulting in increased demand for the shares and driving prices even higher.”

Kamphoni said on the flipside, high inflation tends to encourage more investment on the stock market as investors seek assets that can preserve value against inflation.

Market analyst Bond Mtembezeka said regardless of the economic environment, most counters  in the financial  sactor performed well.

“This has generated interest from potential investors in the process, creating demand,” he said.

Meanwhile, major macroeconomic variables that influence the local shares market such as inflation and interest rates have been  rising.

Inflation rate is currently at 27.3 percent while interest rates have also been on the rise with the bank’s reference rate now at 22 percent.

A stock market investor, Emmanuel Chinunda, said MSE has proved to be a viable investment avenue.  

He said: “While businesses are struggling in the current economic environment, the local shares market has saved us from this misery.

“I have earned almost double the amount invested in the market which I do not think I could have earned if I had put it elsewhere.”

Lovemore Tinto, another SME investor, said in a separate interview his investment on the MSE has more than trippled in one year.

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

“The growth in the profits has subsequently led to demand on the counter leading to price gains,” she said.

Meanwhile, separate published statements from majority of firms have indicated they are expecting to post higher profits in the first half of this year.

In the period ended December 2022, commercial banks posted higher profits compared to the corresponding period in 2021 and cumulatively four banks posted a profit of K1.26 trillion.