Analysts have said the increase in the stock market turnover from K6.2 billion in 2016 to K13.5 billion in 2017 shows that investors are showing more confidence in the stock market and the economy as a whole.
The market has registered a positive return on index reflected in the upward movement of the Malawi All Share Index (Masi) from 13320.51 registered on January 3 2017 to 21598.07 on December 29, giving a return on index of 62.4 percent compared to -8.51 percent in 2016.
In the period under review, a total of 698.8 million shares exchanged hands compared to 410.8 million shares traded during the same period in 2016.
The Malawi Stock Exchange (MSE) has attributed the jump to positive movement of shares in all counters for a good part of 2017 and lower interest rates that boosted demand to trade on the stock market than the money market.
MSE Operations Manager, Esnat Chilije, said improvements on key macroeconomic indicators, including the exchange rate, inflation and interest rates created a favourable environment for business prosperity, which also reflected on the market’s performance.
“Most of the listed companies indicated good performance in their end of year trading statements,” she said.
In a separate interview, African Alliance Malawi Chief Executive Officer, Armstrong Kamphoni, said the results point to increased activity on the stock market giving a positive signal of investors’ confidence to buy more shares on the exchange and at the right price.
Kamphoni said the trends project confidence in the economy and the prospect of listed companies to continue doing well in the future.
“This shows that the stock market responded well to movements in the economy; inflation hitting single digit and reduction of the spread between interest banks charge on deposits as compared to charges on loans, among others, which led to investors coming in to buy more shares.
The year 2017 was historic for the stock market, being the year when the market ended its nine-year listing drought following the listing of Mauritius registered FMB Capital Holdings (FMBCH).
The listing of FMBCH brought the number of listed companies on the local bourse to 14, though temporarily, as FMB Bank has since been delisted.
There have been concerns on the effectiveness of the stock market as share price movements are seen to have little or no impact on the economy.
Kamphoni attributed this to the problem of liquidity the stock market is experience as only a handful of companies are listed on the MSE.
He said going forward, there is need to get more companies to list to make the market more reactive and volatile.
“Most of the early listings were done by government through the Privatisation Commission [now Public Private Partnerships Commission] but since then the market has not been able to attract independent private companies,” he said.
The MSE has since said it is running campaigns to raise awareness on listing on the market and also reviewing listing requirements to make get more companies to list.
Among other interventions, the MSE has created the Alternative Capital Market platform where companies can list and enjoy benefits companies listed on the Main Board are enjoying but with softer requirements.
Among others, companies listing on the Alternative Capital Market platform are not required to have a three-year profit span as is the case for companies listed on the Main Board.