Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha’s removal of capital gains tax (CGT) on stock trades coupled with interest and Treasury Bills (T-Bills) have boosted the Malawi Stock Exchange.
The removal of CGT imposed last November and the developments on the other two variables,notably lending rates and T-Bills yields have seen the local bourse register a positive return on index although some stocks still recorded minimal share price drops, according to Business Review observations.
The data show that all the five listed banks—National Bank of Malawi plc, Standard Bank plc, NBS Bank plc, FDH Bank plc and FMB Capital Holdings, the parent company of First Capital Bank—registered minimal price losses compared to the prior period.
While counters such as Illovo Sugar (Malawi) plc and Sunbird Tourism plc recorded significant price jumps to drive the market to positive return of 0.4 percent and push the market capitalisation to K31.46 trillion from K31.33 trillion.
In a separate interview, stock market analysts have attributed the situation to three factors, namely CGT removal, easing interest rates and falling short-term T-bills yields that make equity investment attractive, but stressed that the transition would be gradual because investors are still repositioning.
Stock market investors and analyst Benedict Nkhoma said on Tuesday that while the market has registered a modest positive return of about 0.4 percent on the index, the broader picture suggests that investors are still in a transitional phase rather than fully repositioned.
“The initial reaction to the tax policy shift has not been a sharp rally, but rather a cautious and selective re-entry into equities,” he said.
Nkhoma said the slow reaction is consistent with how markets respond to structural changes as investors take time to reassess valuations, tax implications and forward-looking returns before committing capital.
He said with T-bills yields declining in recent months and the Reserve Bank of Malawi (RBM) having initiated a policy rate cut, the market is beginning to price the likelihood of compressed interest margins for banks with investors looking to invest in alternative sectors.
“In a declining rate environment, the profitability outlook for financial institutions becomes more nuanced, which is reflected in softer share price performance,” said Nkhoma.
In a separate interview on Tuesday, Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa highlighted that falling T-bills yields and interest rates is potentially redirecting capital back to capital markets while attributing Illovo and Sunbird share price rally to limited float of stocks.
He said the relatively low free float in these stocks has created excess demand, which is supporting price appreciation even in a broadly cautious market environment.
“Looking ahead, a key consideration for investors is the availability of alternative investment options. With money market yields having declined significantly, the relative attractiveness of equities is gradually improving. This shift may support a reallocation of capital back into the stock market over time,” he said
Financial expert Brian Kampanje said investors have a genuine concern that banks’ profits might either stall or decline in view of government’s intention to reduce domestic debt, which has been the springboard for the local banks’ profits.
He said in view of this, investors opt for alternative stocks to invest in.
“The projected reduction of the policy rate to around 18 percent by the end of this year from 26 percent means lower interest income unless banks find alternative sustainable income generating activities,” said Kampanje.
The onset of 2026 is showing early signs of recovery, with modest positive returns, improved sentiment and gradual portfolio rebalancing, following the shift to a two percent withholding tax.
On his part, stock market investor Purity Chitalo said investors will wait for more companies to declare dividends and hold their stakeholder forums to reassess on which stocks to prioritise for investment.
“Stakeholder meetings and annual general meetings will further shape buying and selling decisions made by investors going forward,” he said.
On the other hand, Minority Shareholders Association of Listed Companies secretary general Frank Harawa attributed the measured reaction of the market, so far, to a backlog of shares that were offered for sale while demand was low which are still being cleared now.
Mwanamvekha replaced the 30 percent CGT with a two percent withholding tax that will be deducted at source by the broker, the MSE or any other person designated under the law.
T-bill yields rate have been dropping since the onset of 2026 to between 12 percent and 17 percent due to government’s reduced appetite for borrowing, which coupled with easing inflation compelled RBM to cut the policy rate from 26 percent to 24 percent, resulting in reciprocal cut in interest from 23.7 percent to 22.4 percent.
