T-bills rates drop fails to shift investors’ focus

Much as it is always expected that the drop in money market rates will push investors’ shift to the stock exchange, the 14-counter MSE has not profited between January and February as a result the decline.

Ordinarily, according to market analysts, there is supposed to be a shift of attention by investors to the directly competing investment avenues such as the Malawi Stock Exchange (MSE) in view of the nose-diving Treasury Bills (T-bills) rates from an average 33 percent in January to around 16 percent.

Reserve Bank of Malawi (RBM) results of T-bills auction last week show that the 91-day tenor eased to 16.6 percent from 17.9 percent, 182 days yield dropped to 18 percent from 19.5 percent whereas the 364 days rate declined to 20.5 percent from 22.1 percent.

Analysts are rather philosophical about the current scenario, saying fundamentals and expectations will guide one to say that there should have been lots of investors flocking to the stock market at this time as the interest rates are going down.

“The stock market has, however, not registered that significant activity during the months of January and February 2014 when we compare to the corresponding period last year, much as it still stands to be a sellers’ market on most counters,” explained Nelson Mkwende, manager at Blantyre-based FDH Stockbrokers Limited.

He observed that a few fund managers, foreign investors and high net worth individuals have transacted on the stock market but not that significantly.

But Mkwende said if the rates keep trending downward as it promises to be the case going forward, that will be an advantage to the stock market.

Unlike other established markets, the MSE has proven to be non-responsive to a number of local and regional economic trends.

Even when there has been a radical policy shift, the market has not responded in as fast as analysts could wish.

Another Blantyre-based analyst told Nation Online on Thursday that there is need for the drop in T-bills rates to be sustained for a number of months before any shift in attention is observed.

“The MSE takes a long time to respond to information and sometimes it does not respond at all. But as times go, other investors will be compelled to shift their focus to the stock market,” he said.

The analyst said the Malawi market has not come to the stage where it has to respond to the trend in the economy, or better yet, to be a barometer for the country’s economic performance.

But Mkwende said some players on the MSE are still in closed period on some listed companies whereby they cannot buy or sell shares until the financial results for particular companies on which they are restricted to trade are released.

The MSE has for the past few weeks, been flat with no price movements on some counters, and usually January and February is generally characterised with thin activity.