High rates affect listed Malawi Government bonds

Post was last updated: December 31, 2015

Listed Malawi Government bonds have performed poorly on the local bourse due to high interest rates, FDH Stockbrokers has said.

The Malawi Stock Exchange (MSE) two years ago registered government bonds on the market, but failed to register any trading activity.

FDH Stockbrokers Limited manager Nelson Mkwende said the timing in terms of listing was very poor.

He said for the past years, interest rates have been very high on the local market.

“We needed an environment with moderate interest rates so that the investors should consider the discounting as a viable and profitable option,” said Mkwende.

“Holders should have been induced to discount and earn the required return and not lose money because of high interest rates that have resulted in a huge discrepancy in terms of their investment value and potential discounting prices for such bonds,” he said.

Mkwende said it was difficult for investors to consider the bond market with such discrepancies.

On the general performance of the stock market in 2015, Mkwende said it has not been exciting.

He said the general slowdown in economic activity in Malawi has negatively affected the spending power for most investors, especially among individual investors.

“Even with the fund managers available, activity was restricted to very few counters as a result of poor performance of some of the listed companies,” said Mkwende.

“We can pick out the recent poor performance of Illovo Sugar Malawi Limited which has knocked off the returns of most fund managers by significant margins as a notable example of how bad 2015’s stock market performance has been,” said Mkwende.

He said most stockbroking firms have survived on advisory fees on few transactions as well as negotiated fees for special bargain transactions on Nico and FMB.

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