Treasury lists K1.1tn debt instruments
Treasury on Monday listed on the Malawi Stock Exchange (MSE) 21 debt instruments with a nominal value of K1.11 trillion to improve liquidity on the secondary market and enhance financial inclusion.
The issuing of the debt securities, fixed-income instruments that represent a loan made by an investor to a borrower, is meant to offer liquidity on the 16-counter MSE by generating interest on the bonds.
The debt securities, which include two bonds and 19 treasury notes, attract an average coupon or interest rate of between 10 percent and 18 percent.
In a statement made available to Business News, MSE chief executive officer John Kamanga said the listing will provide a secondary market for the debt securities which are bound to improve liquidity, facilitate price discovery and aid the development of a government yield curve.
He further said the listing will also foster financial inclusion considering that the minimum amount to invest in the listed debt securities through the MSE is only K1 000.
Said Kamanga: “This listing should therefore give a signal to the private sector on the ability of the domestic capital markets to mobilise resources for the various projects they have especially as the economy continues on its recovery path from the impact of the Covid-19 pandemic and the Russia-Ukraine war.”
He added that the listing is in line with the Malawi Capital Market Development Plan which seeks to improve access to Malawi capital markets for economic transformation and development, among other objectives.
MSE debt platform was introduced in 2010, considering the possibility that some entities may not be willing to bring in shareholders in their companies.
Lately, Treasury has resorted to long-term borrowing, shifting away from short-term borrowing, which analysts say is a positive move towards debt restructuring.
However, there has been little or no trading on the government securities as investors hold on to their securities and do not usually trade.
In an interview on Tuesday, Bridgepath Capital Limited chief executive officer Emmanuel Chokani said the development is a positive move towards the development of the market, but stressed that more needs to be done to ensure the move achieves the intended purpose.
He said: “Most investors possibly hold to maturity these instruments. A lack of opportunities is one of the reasons. More market intermediaries providing two-way quotes could be one way of enhancing liquidity and price discovery.”
But Reserve Bank of Malawi Govenor Wilson Banda, in an earlier interview with Business News, maintained that such securities are critical as they create opportunities for investors to buy and sell as well as provide liquidity for those that want to participate in the market.
Kamanga also said MSE has engaged commercial banks and fund managers to reach out to many people and participate in secondary trading.
The listing brings the total number of listed debt securities to 62 with one corporate bond issued by MyBucks, three development bonds issued by the Malawi Government whilst the rest being treasury notes.
