Stock market return on investment in slight drop

Malawi Stock Exchange (MSE) return on investment (RoI) slightly dropped by four percentage points to 36.74 percent in the just-ended year, published data shows.

RoI measures the gain or loss on an investment relative to the amount of money invested, hence the current figures mean shareholders earned less than they realised in the previous year.

Data contained in a Nico Asset Managers market update shows that the Malawi All Share Index (Masi), an overall measure of the stock market performance, was lower than 40.05 percent realised in 2021 but above inflation recorded at 25.8 percent.

In an interview yesterday, Stockbrokers Malawi Limited chief executive officer Noel Kadzakumanja said the return, though slightly lower than the previous year, is positive given the economic situation in 2022.

He said: “Compared to the 2021 performance, the 2022 performance is equally good when we take into account the prevailing difficult economic environment within which the stock market was able to achieve this.”

Market analyst Bond Mtembezeka observed that the primary driver of performance and return on the stock market is price and the weighted average price return feeds into the overall return.

He said: “Overall, the market has shown great resilience this year [2022]and the decline in the return on investment is an indication that some high priced stocks experienced some declines in the year which brought down the weighted average return.”

Minority Shareholders Association of Malawi secretary general Frank Harawa said on Monday that the drop in return on investment is a concern for shareholders.

He said: “It, however, gives us relief to note that the problem is not entirely linked to poor performance of local companies, but to the general business environment.

“With that, we are only hopeful for a better year ahead.”

In 2022, the local shares market performance was largely mixed where in the first half it registered positive return on index despite the decline in values and volumes due to what analysts linked to the tough economic environment

Weighing in on the overall performance of the market, MSE operations manager Kelline Kondowe observed that investors have been able to earn a positive real return on their investment regardless of the tough economic environment.