Treasury lists K787bn bonds
Ministry of Finance yesterday listed on the Malawi Stock Exchange (MSE) 26 bonds with a nominal value of K787 billion, hoping for a positive response from the investing public.
The issuing of the bonds, a fixed-income instrument that represents a loan made by an investor to a borrower, is meant to offer liquidity on 16-counter MSE through generation of interest the bonds have attracted from the investors following their primary issuance.
The bonds, which include K18 billion development bond which Treasury issued in August as part of the K1 trillion development bond, attract an average coupon or interest rate of 15 percent payable in two phases.
Speaking during the listing in Blantyre, Reserve Bank of Malawi (RBM) Governor Wilson Banda said the securities create opportunities for investors to buy and sell and also provide liquidity for those that want to participate in the market.
“The worst part of this kind of investment is where you buy a piece of paper from the primary market and you cannot trade, but here the MSE is providing that platform for liquidity through the secondary market,” he said.
Banda backed the listing of the debt securities, saying the borrowing is meant for investment, stressing that borrowing for that purpose is not bad.
He said: “It is only borrowing that goes into consumption which is a cause for concern, but this is for investment purposes.
“This debt is already in the
system and we want to provide liquidity to those that bought the paper on the primary market. We need to send it out there to create activity.”
The listing of the 26 bonds has increased the number of listed government debt securities to 44, creating diversified trading products on the market.
MSE chief executive officer John Kamanga said the listing does not only provide a product range for the investors, but also sends a signal that the capital market is deep enough to raise funds for investment and refinance debt.
He said: “Issuing of bonds within the capital market is advantageous to the government and Reserve Bank of Malawi because this is done at a relatively low cost because the rates are competitive
when compared to bank rates.
“This is also advantageous to investors to realise rates above inflation. The bonds attract rates of between 13 percent and 15 percent and when compared to the inflation rate, which is 9.5 percent, they are positive real interest rates and, therefore, this provides an opportunity for the investors to create wealth.”
The listing has also excited market analysts, including Bridgepath Capital Limited whose chief executive officer Emmanuel Chokani described the development as a positive move towards the development of the market.
He said the bond adds more products to the pool of trading instruments on the market.
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.
But yesterday Kamanga indicated that MSE has engaged commercial banks and fund managers to reach out to many people and participate in the secondary trading.
He said: “Instead of having only four brokers, we have extended an olive branch by including dealers in the commercial banks and fund managers.
“Currently, all eight commercial banks and fund managers are now part and parcel of our agency which means we have increased brokers in terms of dealers.”
