MSE Magazine 1 - Malawi Stock Exchange
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Issue 4, 2020 MSE Magazine 1
Members
Stockbrokers Malawi Ltd Cedar Capital
Ground Floor, NBM Tours 4th Floor, Livingstone Towers
Corner Hannover Avenue Glyn Jones Road
Henderson Street PO Box 3340, Blantyre
PO Box 31180 Malawi
Blantyre 3, Malawi Tel: (265) 1 831 995
Tel: (265) 1 822 803 akamphoni@cedarcapital.mw
(265) 1 824 327
Fax: (265) 1 824 353
Email: sml@smlmw.com
www.stockbrokersmalawi.com
Continental Capital Limited Alliance Stockbrokers Ltd
4th Floor, Unit House Old Air Malawi Building
Victoria Avenue Robins Road
Blantyre, Malawi PO Box 510
Tel: (265) 1 821 300 Blantyre, Malawi
(265) 1 753 840 Tel:(265) 1 830 704/5
Email: info@cdh-malawi.com asl@aclmw.com
www.cdh-malawi.com www.alliancestockbrokersmw.com
Non - Members
FMBCH
Private Bag 122
Blantyre, Malawi
+265 1 821 995
info@firstcapitalbank.co.mw
Old Mutual Investment Group NBM Capital
Old Mutual Building PO Box 945
PO Box 393 Blantyre
Blantyre. Malawi Malawi
+265 1 820 677 +265 1 820 622
mmikwamba@oldmutual.co.mw bjere@natbankmw.com
NICO Asset Managers Continental Capital
Chibisa House PO Box 1444
PO Box 3173 Blantyre
Blantyre, Malawi Malawi
+265 1 832 085 +265 1 821 300
invest@nicoassetmanagers.com info@continental.mw
Corporate Advisors
CDH Investment Bank Standard Bank of Malawi
PO Box 1444, Blantyre PO Box 1111, Blantyre
+265 1 821 300 +265 1 774 688
Deloitte NICO Asset Managers
PO Box 187 PO Box 3173
Blantyre, Malawi Blantyre, Malawi
+265 1 820 277 +265 1 832 085
Old Mutual Investment Group EY
PO Box 393 PO Box 530
Blantyre , Malawi Blantyre, Malawi
+265 1 820 677 +265 1 876 476 / 870 367
My Bucks Corporation Alliance Capital Limited
PO Box 31567 PO Box 510
Lilongwe 3, Malawi Blantyre, Malawi.
+265 1 772 500 +265 1 830 704
info@nfb.mw info@alliancecapitalmw.com
2 MSE Magazine Issue 4 2020
Issue 4, 2020
CONTENTS
OUR GROWTH STORY
The Exchange has grown from strength to
strength since its inception in 1994.
12
Page 06
LISTING REQUIREMENTS REVIEWED
Be up to date with the current listing requirements
on the Malawi Stock Exchange.
Page 08
RAISING FINANCING
Learn how you can raise financing through
issuing a bong on the exchange.
Page 10
12
EXCLUSIVE INTERVIEW
An exclusive interview with CEO for Malawi
Stock Exchange, Mr. John Robson Kamanga.
Page 12
THE ALTERNATIVE NEXT DOOR
What is the alternative next door one can have
to listing on the exchange?
Page 16
BUYING & SELLING SHARES
Understand how you can buy and sell
shares on the exchange.
Page 24
DAILY TRADING REPORT
Get a glimpe of how a daily trading report
at the Malawi Stock Exchange looks like.
Page 26
SAVINGS AND INVESTMENTS
There is need to understand savings and
investments in financial literacy.
Also Inside
Page 28
TRADING IN THE DIGITAL SPACE 2 Foreword
The world has become a global village through
digital technology. 20 Pictorial
Page 30
29 FAQ,s
INVESTOR PROTECTION
10 34
Investors need protection when 2019 Trading Summary
entering a market.
36 The Corporate Citizen
Page 32
Issue 4,Issue
20204, 2020 MSE Magazine 11
CEO’s Foreword
especially with emergence of value addition developments. The listings requirements
business lines. Measures are however being were last revised in 2009.
taken to resolve the power deficit.
The Stock Exchange conducted various
Market Performance activities aimed at courting potential issuers
including holding one on one business
The market registered a positive return on clinics and, notably, held its first bond
investment of 4.38% (3.41% in US$ terms) market symposiumin December 2019.
in 2019 compared to the return of 34.19%
(33.42% in US$ terms) in the prior year. It Initiatives going forward
also recorded an increase in volume of shares
traded despite registering a decrease in total Going forward, the Exchange will continue
value traded compared to the corresponding with its efforts of implementing its strategic
period in 2018. The market transacted a plan anchored by the improved prevailing
total of 1,393,849,808 shares at a total macroeconomic environment. This will be
consideration of K46,370,960,122.47 done by focusing on expanding the Stock
(US$63,638,717.53) representing an Exchanges’core business through increasing
increase of 45.46% in volume and marginal number of conventional Exchange products
decline of 4.77% in traded value. There were (equity and bonds) by engaging with
however no trades on the debt securities potential issuers to access the market on
market. their capital raising initiatives. Notably, the
year 2020 will also see the rebranding of one
I t gives me great pleasure to present to our Market capitalization, a measure of of its equity platforms, Alternative Capital
esteemed investors, issuers and capital the size of a market, increased both Market, to Enterprise Development and
market stakeholders the fourth edition in Kwacha and United States Dollar Growth Exchange (EDGEx) to underpin
of the MSE magazine for the year ended terms from MK1,284,705.65million its role in serving SME’s. Public awareness
December, 2019.When the first issue of the (US$1,760.24 million) in January 2019 to initiatives for the investing public will
magazine was published in 2016, we did MK1,428,752.94million (US$1,939.51 remain the main focus for the Exchange in
not anticipate the support and interest that million) as at 31stDecember 2019,resulting 2020. We will also continue engaging policy
you, the readers, have shown. For this, we from share price gains on eight listed makers on policy issues affecting stock
are grateful. companies. Market liquidity, measured by market operations and development.
a ratio of total value of trades to market
Economic Environment. capitalization, was slightly lower at 3.25% Appreciation
from 3.79% registered in 2018.
The overall macroeconomic performance I would like to sincerely thank the Registrar
during the year 2019 remained favorable to Accomplishments for the year 2019 of Financial Institutions who, is the
capital market operations and the economy Governor of the Reserve Bank of Malawi, for
in general. Real GDP is estimated to have 2019 was yet another busy year for MSE as the support rendered to the Exchange and
grown by 5% in 2019 from a rateof 4% we continued to implement our 2016-2021 all capital market participants and members
in 2018. Inflation remained within single strategic plan. The Exchange accomplished who share the MSE vision of promoting a
digit for most part of the year and averaged among others the following strategic responsive market worthy of public trust
at 9.4%, which is marginally higher than activities during the year: that is characterized by transparency and
9.2% registered in 2018. The policy rate was integrity.
revised downwards to 13.5% from 16% at ICON properties raised MK14.70 billion
the end of 2018. To foster transmission of through an Initial Public Offer and Special gratitude is extended to the MSE
monetary policy, the monetary authorities subsequently got its shares listed on the Board of Directors, for the untiring effort,
introduced the reference rate to form the Stock Exchange on 21 January 2019. support and guidance in steering the
base lending rate for commercial banks. As Exchange to achieve its mandated objectives
a result, this saw a reduction in base lending The Malawi Stock Exchange listed two of providing a market for raising capital
rate to 12.50% at the end of 2019 from corporate medium-term notes issued by and trading of securities. I am also greatly
24.78% in the prior year. Returns on the MyBucks Banking Corporation, under its indebted to my fellow team members of the
money market also declined,as depicted by K14 billion medium term note program. MSE for their effort and dedication that
the return on 91 days and 364 Treasury bills has made it possible to attain the achieved
from 11.41% to 6.15% and from 12.83% to The Malawi Stock Exchange listed three goals. The work we have achieved has
8.32%, respectively. The exchange rate was Government of Malawi Treasury Notes in demonstrated that we indeed hold true to our
largely stable against the US$ recording a the year. values of Transparency, Teamwork, Fairness,
marginal depreciation of 0.93% and trading Professionalism, and Integrity. Lastly to our
at MK736.66/US$ as at 31 December Airtel Malawi plc commenced an Initial esteemed investors, I would like to assure
2019. This was largely driven by good levels Public Offer in 2019 for a listing to be done you that the MSE remains committed in
of gross forex reserves at 4.05 months’ worth on 24 February 2020. propelling the market to greater heights. We
of import cover as at the end of the year. The are confident that the Exchange will attain
favourable economic indicators have created Following automation of the trading the aspirations encompassed in its goals.
a conducive environment for business system, the Stock Exchange introduced two
operations and also attracting investors to new products namely MSE Cloud and View May God bless Malawi and all of us!
the capital market. Only Terminal (VOT). These have increased
the value offering to users. I thank you,
The economy however continues to be
faced with energy infrastructural challenges The Malawi Stock Exchange made revisions
of intermittent power supply which has to its Listings Requirements in order to
negatively affected business operations ensure that regulation is responsive to market John Robson Kamanga
2 MSE Magazine Issue 4 2020
Issue 4, 2020 MSE Magazine 3
VISION
We aim to promote a responsive market worthy of public trust
characterised by transparency and intergrity.
MISSION
Our mission is to provide and operate a fair, orderly, transparent
and properly regulated capital market for the creation of value
to our investors and listed companies.
OUR CORE VALUES
Our core values are the defining principles by which we operate
as individuals and as a company. They define who we are , how
we work, what we believe in and what we stand for.
These core values are outlined as follows;
Transparency
We believe that transparency is an essential part of our busi-
ness and that, it enables us to function at a higher level ,
accompanied by availability of full information required for
collaboration, cooperatin and collective decision making to our
stakeholders.
Team Work
We are a team that is built upon the foundations of innovation,
success, development, problem solving, progression and client
relations in order to achieve a common goal of ensuring inves-
tor and issuer’s protection.
Fairness
We are a business whose characteristics of fairness are a quality
of being just, equittable and impartial. To us, fairness means
uncompromising adherence to ethical values in our business
conduct.
Professionalism
We believe that our professionalism is not a label we give our-
selves, but it is a description we hope our clients will apply to us
because of our positive attitude, communication, knowledge,
responsibility, skills, loyalty and customer care values we pro-
vide.
Integrity
We adhere to moral principles which are ethical, honest, truth-
ful, upright and sincere in our conduct with our valious stake-
holders and we take responsibility for our actions.
4 MSE Magazine Issue 4 2020
Issue 4, 2020 5 Wealth Malawi MSE Magazine 5
ISSUER SEGMENT
OUR GROWTH STORY
Kelline Kanyangala is the
Operations Manager at the Malawi
Stock Exchange.
For more information, contact Malawi
Stock Exchange on +265 1 824 233
or info@mse-mw.com or you can also
contact your nearest broker.
Kelline C. Kanyangala
T he Malawi Stock Exchange (MSE) introduced to cater for Small and Medium over sessions that were conducted on the
opened its doors in 1994 but started sized companies who would like to raise Stock Exchange trading floor. The trading
equity trading in November 1996 capital at a lower cost by accessing public system has greatly improved trading activity
when it first listed National Insurance funds. on the exchange and reduced the settlement
Company Limited (NICO). cycle from T+5 to T+3.
The Listings Requirements for the
Prior to the listing of the first company, Alternative Capital Market board are Due to automation, the number of traded
the MSE provided a market for secondary more flexible to accommodate the unique shares in 2019 increased by 49.46% when
trading in Government of Malawi securities challenges that SME’s face. For instance, a
namely, Treasury Bills and Local Registered company does not require to have a profit compared to 2018 whilst the number of
Stocks. Since its establishment, the MSE history to list on the Alternative Capital transactions increased by 42.31%.
has played and continues to play a vital role Market board whilst the Main Board
in capital market development in Malawi. requires a three-year profit history. The Stock Exchange has and continues to
undertake various initiatives to improve
The MSE was critical to the privatisation The platform will this year be rebranded to awareness of the stock market in Malawi as
of state-owned enterprises and is pivotal “EDGEx” (Enterprise Development and guided by its strategic plan. The Exchange
to the listing of enterprises that seek to Growth Exchange) in order to underpin developed and distributes handbooks and
raise long-term capital for expansion and its role in serving SME’s. The platform is leaflets on stock market investing and capital
restructuring. The MSE has listed a total of however yet to register a listing. raising. The Exchange also undertakes
16 companies but also delisted 2 companies. various financial literacy initiatives such as
The number of listed companies presently The Stock Exchange considered the school and office visits, hosting symposiums
stands at 14 companies (Refer to the timeline possibility that some companies would not and workshops, conducting journalist
on the other page.) be willing to bring in new shareholders seminars, participating in trade fairs and
within their business and as a result the Debt road shows, among others.
Prior to 2007, MSE only had one board Securities Market was then established in
for listing companies, the Main board. The 2010 to cater for this group of companies.
Main Board is meant to cater for larger and The exchange has a staff compliment of
well-established companies that would like There are currently 5 corporate bonds and 9 10 headed by the Chief Executive Officer,
to raise capital. government bonds listed on the MSE debt Mr. John Robson Kamanga. Dr. Winford
platform. Masanjala is the Chairperson of the Board
In order to accommodate more businesses of Directors
and improve accessibility to the Exchange, In terms of infrastructure, the Stock
the Malawi Stock Exchange introduced the Exchange went digital in June 2018 when it
Alternative Capital Market board in 2007. implemented use of an Automated Trading
The Alternative Capital Market board was System (ATS). The ATS replaced the call
6 MSE Magazine Issue 4 2020
Wealth Magazine
Issue 4, 2020 Wealth Magazine 77
MSE Magazine
ISSUER SEGMENT
MALAWI STOCK EXCHANGE
LISTING REQUIREMENTS REVIEWED
Madalitso Mittochi
A stock market is a highly regulated
market, this is so because investors’
money needs to be safeguarded at all
cost. For a stock exchange to be trusted, its
The review process was also necessitated to
align the Malawi Stock Exchange Listing
Requirements with other stock exchanges
in the region and the rest of the world.
5.
The Listings Requirements have
been revised to be in line with new
International Financial Reporting
Standards.
integrity needs to be maintained, the issuers
and investors need to have confidence in A qualitative approach was followed to 6.
The ListingsRequirements has been
the market. benchmark the listingsrequirements with updated to be inline with new
other stock exchanges. This was paramount development in the capital market,
The Malawi Stock Exchange (MSE) strives in order to make the Stock Exchange
to be above par when comparedto its peers attractive and competitive when compared notably, automation of trading.
in the region and internationally as far as to its counterparts in the region.
performance and regulations are concerned. It is expected that the new Listings
The Exchange engaged its stakeholders Requirements will be implemented by the
A sound and up to date regulatory in the process of reviewing the Listings end of first half of 2020 once all necessary
framework enhances investor confidence Requirements. Listed companies, approvals have been met. It is the hope of
in the securities market. The laws and Stockbrokers and other capital market the Exchange that once the revised Listings
regulations that govern the securities market stakeholders were consulted for their input Requirementsis implemented it will
are there to protect investors, maintain fair, in the review of the Listings Requirements.
orderly and efficient market, and facilitate improve the doing business on the stock
capital formation. As already alluded to, other stock exchanges exchange.
in the region were engaged to benchmark
Since 2010, the Malawi financial sector has the Listing Requirements. Views from It will also give confidence to the issuers,
seen a number of new Acts and regulations various stakeholders were consolidated investing public and other stakeholders
being introduced to improve the running and currently the Listings Requirements because they will be assured that the stock
of business in the financial sector. In July are awaiting submission to the Registrar of market is regulated with robust and up to
2010, the Financial Services Act (FSA) Financial Institutions for approvals. date legal framework
was assented to by the president of Malawi
to regulate and supervise licensing and One might ask, what are the expected
operations offinancial institutions in changes that will come with this amended
Malawi. ListingsRequirements? Some of the major
changes are as follows:
In addition to the FSA, the Securities Act
2010 was enacted into law to regulate all 1. Clauses which were contradicting the
persons conducting securities business. provisions of the above-mentioned
Securities Act 2010 replaced the then new Acts have been revised to be in
repealed Capital Market Development Act line with the new Acts.
1990, which used to regulate the capital
market. In 2013 a new Companies Act was 2.
Minimum capital requirements for
enacted to replace Companies Act 1984. listing on the Exchange have been
revised
During the period between 2015 to date the 3.
Enforcement of the Listing
Registrar of Financial Institutions has come Requirements has been revised and Madalitso Mittochi is the Finance
up with a number of Directives to enhance Manager and Company Secretary at
enhanced the Malawi Stock Exchange.
implementation of Financial Services Act
and Securities Act 2010. All these changes 4. Listing and trading practiceshave been For more information, contact Malawi
Stock Exchange on +265 1 824 233
in the legal framework necessitated the revised so as to be in line with regional or info@mse-mw.com or you can also
review of the MSE Listings Requirements and international best practices on contact your nearest broker.
to be in line with the new legislations. listing guidelines.
8 MSE Magazine Issue 4 2020Issue 4, 2020 MSE Magazine 9
INVESTOR SEGMENT
Raising finance
through issuing a bond on
the Malawi Stock Exchange
Is your company in need of financing?
Noel Kadzakumanja
CEO Stockbrokers Mw
T
here are many ways of financing purchase, factoring and bonds. This The following are bonds classified
but what is right method really discussion is about bonds. according to interest:
dependson circumstances of your
business.Regardless of which option According to Investopedia, a bond is Fixed rate bonds whose interest
your company takes, any choice will defined as a fixed income instrument remain fixed throughout the tenure of
fall under two categories, eitherequity that represents a loan made by an the bond.
or debt. investor to a borrower (typically
corporate or governmental). Floating rate bonds with interest that
Through equity, financing will be by fluctuates as per the current market
way of your company selling shares to It is a unit of debt issued and securitized reference rate.
investors, making them part owners as tradeable asset. Worldwide, bonds
in your business. Equity finance can are used by companies, municipalities, Zero interest rate bonds which do not
be accessed from individual private states, and sovereign governments to pay any regular interest to the investor
investors or venture capitalists. finance projects and operations.
Inflation linked bondswhich have their
Having mentioned equity financing Types of bonds interest rate liked to inflation.
in brief, let’s turn to the main focus
of our discussion, debt financing. By A bond can be categorised according Perpetual bonds which do not mature
deciding to finance your business to who issues them, according to type and interest is paid throughout.
using debt capital, it means you are of interest attached to it oraccording
borrowing funds that will be repaid to itsother characteristics. Bonds can also be classified according
within a period of time. to their other characteristics and
Named after the issuers and famous examples are as follows
It can be for a short term, medium or locally are treasury bonds and
long term.There are various sources corporate bonds. The MSE has listed Subordinated bonds which are given
of debt finance and these include both of these. less priority as compared to other
bank loans, trade credit, installment bonds of a company.
10 MSE Magazine Issue 4 2020INVESTOR SEGMENT
Bearer Bonds which do not carry the Process of issuing bonds on the Malawi on the MSE.
name of the bond holder such that stock exchange
anyone who possesses them can claim Real Example of Corporate Bond
the amount In order to list on the MSE, a Issued on the Malawi Stock Exchange
company ought to be incorporated,
War bonds used by any government to compliant with laws of the country Locally, a very good example of a
raise funds for financing a war in which it is registered, allowed by listed corporate bond is one issued
its own memorandum and articles of by MyBucks Limited and listed on the
Serial bonds maturing over a period of association to list, and get appropriate Malawi Stock Exchange on 9th July,
time in installments consents from its Board of Directors, 2018. The bond listing was part of a
Reserve Bank of Malawi and others. domestic medium term note program
Climate bonds issued by any aimed at gradually raising debt capital
government to raise funds for A company intending to list its up to a maximum of K14 billion over a
managing adverse changes in climate debt securities will need to take the period of 3 years. By the time the bond
following steps: was being listed, the first required
Method of raising finance in Malawi amount of K4 billion had been raised
through bonds Step 1. Prelisting and to date, a total of K12.5 billion has
been realised.
A company can raise finance by either Appoint advisors
directly and privately approaching The issued bonds offer a floating
individual or corporate lenders or by Verification of MSE listing requirements interest rate that fluctuates with rate
issuing a bond on the Malawi Stock ofTreasury bill. Tenor of Treasury bill
Exchange for the public to purchase. Due diligence review. varies depending on agreement
entered with each investor. Interest
Why should a company choose Malawi Pre-verification of application. is payable quarterly. MyBucks has
Stock Exchange? benefited from low interest cost
Preparation of information
memorandum. which are only at a rate of a treasury
There are many reasons why a bill plus a marginwhile investors have
company would opt for issuing a bond benefitted from interest income that
on the MSE and the following are some Listing structure set up.
is always guaranteed to be above the
of many benefits:- rate of agreed Treasury bill.
Step 2. Listing
The issuer benefits from greater To raise these funds, initial fees and
visibility and enhanced brand. Application for provision admission to
trading. costs totaled MK375 million and
Boosts investor confidence by included a primary listing fee of
generating more transparency. Submit an application for listing. MK1 million to the MSE. Apart from
interest cost, MyBucks pays to the MSE
No dilution of company’s shareholding Pay listing fees. annual sustaining fees of 0.05% of the
nominal value as listed on the MSE on
Capital can be raised at a relatively Approval and registration of 31st December of every year. These
cheaper cost. information memorandum. costs compared to other alternative
costs of debt finance are significantly
Increased liquidity in a market that is Granting of listing. low while the bond comes with extra
well regulated. benefits some of which have already
Official listing. been cited above.
Improved price discovery.
Trading Conclusion
A listed security can be more attractive
to investors. Step 3. Post – listing There could be many companies out
there struggling with huge costs of
Improves livelihood of people who Board declaration of resolution. debt while a bond listed on the MSE
are able to earn more from interest could be a much cheaper alternative.
Financial reporting. Some are not in debts at all but have
income that is usually higher than in
many other money market investment Adhoc announcements. a desire to grow their business and a
avenues. listed bond offers the needed cheap
Secondary market reporting source of extra capital. I would like
Interest paid in servicing the bond is requirements. to recommend that these and all
deductible from taxable income. other entities in need of debt capital
Annual fees. consider raising the needed finance by
issuing bonds on the MSE
Secondary trading of debt securities
Issue 4, 2020 MSE Magazine 11EXCLUSIVE INTERVIEW 12 MSE Magazine Issue 4 2020
EXCLUSIVE INTERVIEW
CONGRATULATIONS FOR listing at the Stock Market, they
ADDING ONE MORE MEMBER generate an economic benefit for
TO THE EXCHANGE. ARE YOU themselves, society and the economy
PLANNING TO ADD SOME as a whole. The exchange has always
MORE IN THIS YEAR? been attractive as an alternative source
of finance whose cost is far much lower
Certainly yes, it has always been our than traditional bank loans and/or
plan for Malawi Stock Exchange to overdrafts. For instance, MPICO plc
increase the number of listed companies raised MK9 Billion at a cost of 2.7%
and products especially now that we when lending rates were around 28%
have acquired an automated trading on average.
platform. In our strategic plan, one of
the pillars is to increase liquidity in the WHAT PLANS DO YOU HAVE TO
market and that is through increase in GROW THE BOURSE?
the number of listings.
There are a number of activities that
WHY HAS IT TAKEN 10 YEARS TO we have put on board to propel the
HAVE NEW ENTRANTS ON THE Exchange to greater heights. We would
MALAWI STOCK EXCHANGE? like the MSE to be part of the big
players in the economic development
Around 2009 to 2010 when the world of our country through wealth and job
was affected by a financial crisis, Malawi creation of the general populace.
was not completely spared as we also
experienced a backlash of foreign One of the activities is to increase
portfolio investors withdrawing from issuer awareness through; one-on-one
our Market in search of cheap stock in meetings with Directors and Executive
developed securities market. This led to Management of potential issuers,
price reduction in most of the stocks at production of simplified brochures
the exchange due to excess supply. on “going public” and participation
in various corporate exhibitions such
The end result was that most investors as symposiums. We would also like to
lost their wealth which later eroded utilize the technological infrastructure
confidence to both investors investing that we have acquired by introducing
in our market and issuers in utilising other asset class of securities such as
the securities market as source of Exchange Traded Funds as well as
alternative finance. taking the market to the finger-tips of
our investors where they would be in a
With the passage of time, we position to place orders through mobile
The Malawi Stock Exchange has recently experienced the bouncing back of our phones.
been experiencing vibrancy through listings market with good and high returns.
after a 10 year break. Does this vibrancy mean
anything going forward? Are we going to see This necessitated us to conduct business SINCE YOU INTRODUCED
many other corporate institutions listing on clinics on one-on-one meetings with THE ALTERNATIVE CAPITAL
the exchange? Mr. John Robson Kamanga, companies on how to best utilise the MARKETS, NO SME HAS
CEO of Malawi Stock Exchange sheds more Exchange in capital raising and wealth BENEFITTED FROM THE
light in this interview.
creation for existing shareholders. PLATFORM. WHERE IS THE
EXCHANGE OR THE BUSINESSES
The initiatives have started bearing GETTING IT WRONG?
fruits as we have now witnessed the
listing of ICON and we are very Through the survey we conducted,
optimistic that more will be listed in we found out that most of our SMEs
the first half of 2019. have corporate governance problems
especially in the area of transparency
DOES IT MEAN THE EXCHANGE and disclosure and these are paramount
HAS NOT BEEN ATTRACTIVE in attracting investors. There is also a
ENOUGH FOR COMPANIES TO myth of losing control.
LIST AND ACCESS THE CHEAP
CAPITAL? The fact of the matter is that when
a company lists on our Alternative
The Stock Market has a critical Capital Market, the percentage to be
function, which is to raise capital at a offered to the public is 20% which is
lower cost. spread to a minimum of 100 people
and the 80% remains with the existing
It is a platform which drives the shareholder. You can clearly see that
economies worldwide, thereby making control is not lost by going public.
it the most attractive platform for
companies to access cheap capital that We are however engaging potential
is capable of funding long-term goals. Medium Enterprises to utilize the
When corporations do well through Exchange as a source of raising capital
Continued to page 14
Issue 4, 2020 MSE Magazine 13EXCLUSIVE INTERVIEW
Continued from page 13
“Corporation,
I would like to encourage State-owned enterprises such as Malawi Housing
ESCOM, EGENCO, and Water Boards to utilize the Exchange to raise
cheap capital for their various projects.
and very soon we will rebrand the name adheres to regulatory requirements in all your company is able to increase its share
to reflect the objective of the creation of aspects of its business conduct. capital compared to debt capital thereby
this platform for the SME sector. improving its overall financial position.
Research has shown that companies with
WHAT SHOULD HAPPEN high standards of corporate governance Increase liquidity to shareholders:
TO NECESSITATE A LIVELY, principles access capital at low cost. Listing provides liquidity to shareholders
ACTIVE AND VERY ATTRACTIVE by providing a ready market in the event
EXCHANGE? ONE MALAWIAN ASKED HOW that the shareholders would like to exit
MALAWI BENEFITS FROM THE or realize value from their shareholding.
The MSE will continue to do the MALAWI STOCK EXCHANGE? Most majority shareholders have used
initiatives that it is already doing to reach Initial Public Offers (IPOs) as an exit
out to the public through various media The MSE is a market where companies strategy.
platforms such as one-to-one business can raise long term capital and also a
clinics, symposiums, exhibitions, market where investors can buy and Market determined valuation: Once a
roadshows, print media, social media sell securities such as shares and bonds. company is listed, the market value of the
marketing etc. One of its functions is to provide a link company is determined by the market
between financial raisers (the issuing through the trading of the company’s
These initiatives have already proven companies) and financial suppliers shares on the stock exchange.
to be effective tools of disseminating (investors).
the information to the public about Motivation to staff: The company during
the MSE because we have a number of To an investor, some of the benefits are: listing may provide shares to employees
potential companies requesting for listing • Dividend income: A distribution of through an Employee Share Ownership
proposals, listing requirements and more a part of a company’s net profits to Scheme which serves as an incentive to
related information for their decision shareholders employees to put in best efforts in their
making. • Capital Gains: This is the increase in the work as it brings a sense of ownership to
share price over time.
So, it may take time, but eventually it will • Shares can be used as loan security or them.
bring forth good results. As earlier said, collateral.
we are working on introducing a mobile • Liquidity: You can sell your shares ANY MESSAGE TO THE BUSINESS
trading platform to give an easy access of anytime to obtain cash COMMUNITY AND/OR
the market to our investors so as to enable • Diversifying your risk: You have a wide STAKEHOLDERS?
them put orders through their respective choice of companies to invest in.
broker(s). The Exchange is a vital player in the
Whereas the issuer benefits from economic development of the country
WHAT ROLE DOES GOOD following: and it is in this cognizance that we are
CORPORATE GOVERNANCE PLAY taking the Exchange to the Malawian
IN REGARDS TO LISTING ON THE Company profile: Listing may improve citizens to embrace and utilize its services
EXCHANGE? your company’s profile especially either as an investor or an issuer who is in
considering the publicity that comes search of long- term finance at relatively
Corporate Governance practices is a vital with the listing process but also with the low cost.
strategic decision within an organization coming in of more local shareholders.
because it shows that a corporation I would like to encourage State-owned
upholds its business ethics. It shows that Efficient way to raise capital: A public enterprises such as Malawi Housing
an organization incorporates the interests issuance of shares will provide your Corporation, ESCOM, EGENCO, and
of its stakeholders. company with access to large pools of Water Boards to utilize the Exchange
funds through the numerous investors to raise cheap capital for their various
A company which follows corporate who invest in listed instruments. projects. For the investing public, time
governance, has a high probability of is now for your hard-earned savings to
getting into partnerships with other Improve financial position of the start working for you. Make that right
stakeholders, investors, shareholders etc. company: decision to start investing on the Malawi
because it shows that that the company By issuing additional shares to the public, Stock Exchange
14 MSE Magazine Issue 4 2020Issue 4, 2020 MSE Magazine 15
INVESTOR SEGMENT
The Alternative
Next Door
By Emmanuel Chokani FOR LISTING?
Introduction Typically, most asset managers have market in place, other alternative methods
pension funds with a longer liability profile are used to value the asset.
Assets under management (AUM) than the liability profile for banks which
continue to grow with assets now crossing is mostly short term. This mismatch of As one goes down the valuation pyramid,
the K1.3 trillion mark based on Reserve liability profiles presents an opportunity away from the readily available market
Bank of Malawi data, as at 31 December for institutions (issuers) to raise longer basis, the discounts get larger and larger
2019 (source:RBM). term financing from these pension funds. implying that the valuation multiple
reduces. So an asset manager faced with
These assets are pre-dominantly held by life Asset managers are active in the debt capital two assets – one listed on the stock
insurance companies and pension funds, markets. A debt capital market (DCM) exchange which is a readily tradable market
which account for 79% of the AUM. An indicates a market in which companies and where one can price its instruments daily
analysis of the composition of these assets government can raise funding through the and another asset which is not listed on the
indicates that 41% of the assets are in trade of debt securities, including corporate stock exchange, the inclination is always on
equity comprising of 14 counters listed bond, government bonds, commercial the one that is listed as the value can be
on the Malawi Stock Exchange (prior to papers etc. readily ascertained.
Airtel). That amounts to over K532 billion
of the total AUM. A further K512billion of A bond is a means of borrowing money Other reasons come into play including
these funds are in fixed income investments by issuing the lender with a transferable stronger governance standards, availability
with a tenor of less than one year. security in return for the loan, as well as an of information and easier exit options
undertaking to pay interest on the loan and which give more weight to having listed
According to the classification, these to repay the principal at the end of the loan assets on the portfolio. Therefore, assuming
include treasury bills and fixed deposits term. A bond is a means of acquiring loans a company has two assets, the listed asset
with banks. With the market growing at from a number of investors in the securities would have a higher valuation than the
29% annual compound growth for the past market. asset which is not listed. In addition,
12 years, and close to K8 billion per month because it is listed, it is easier to trade the
coming in as pension fund contributions Valuation of assets asset on the debt capital markets.
into the sector, a large challenge for various
asset managers is deciding where to allocate The country currently has five licensed How to access these funds
their investment portfolio. asset or portfolio managers who have
various portions of the K1.27 trillion Accessing capital from these pension funds
Banks on the other hand, based on Reserve AUM. These are the gatekeepers of these through the debt capital markets is a fairly
Bank of Malawi data, hold K1.8 trillion funds and Trustees of pension funds longer process than accessing finance from
of assets as at 30 June 2019. 35% of those require their recommendations on major the banks. The advantageto an organization
funds are in loans and advances. 40% is investments they intend to make based on of raising funds from the pension funds is
held in short term negotiable securities/ the investment mandates they have. the longer tenor of the finance, the more
Treasury bills. flexible the terms of the instrument, a
Mostly on a quarterly basis, the asset lower cost structure etc.
Accessing funds from pension funds and managers sit down with Trustees or
life insurance companies Directors of an investment committee to The first step in the process to raise funds
report back on investment performance from debt capital markets is to identify
The banks are usually the first point of of the portfolio they are managing. In an investment advisor. Asset managers
call for anyone looking to raise finance for preparing these investment reports, the are also investment advisors as mandated
working capital or projects. We deal with underlying investment portfolio has to be by the portfolio managers directive from
them everyday in accessing our needs and valued. Reserve Bank of Malawi (RBM). Several
they always come to mind when looking commercial banks are also licensed by
for funding. On the other hand, asset Accounting standards point to valuing RBM as investment advisors. Once the
managers sitting with K1.27 trillion are assets from a fair value point of view and investment advisor is selected, a non-
also another viable route to access funds. where one does not have a readily tradable disclosure (NDA) or confidentiality
16 MSE Magazine Issue 4 2020Issue 4, 2020 MSE Magazine 17
INVESTOR SEGMENT
“ Key issues being looked at by the asset manager from a credit perspective would be the
governance structure of the issuer, analysis of the ability to repay, various terms and
conditions including pricing and redemption conditions.
agreement is signed with them. The role Once approval is received from the terms and conditions including pricing and
of the investment advisor is to prepare an institution’s board of directors and redemption conditions.
information memorandum/prospectus, regulatory approvals are granted (Malawi
fix the price of the bonds and organize Stock Exchange and Reserve Bank), the Conclusion
placement in the market. investment advisor would then take the
documentation which includes the final Asset managers prefer listed assets than
After the NDA is executed, a listing of information memorandum or prospectus unlisted assets in their investment portfolio.
information requirements is provided by to the asset managers to consider investing In addition, asset managers are looking
the investment advisor which will typically in the bond. for longer term assets rather than short
cover information on the institution term assets to enable them to match with
(governance structures, management and For a listed instrument, this process can go their liability profile if they are managing
director profiles) and financial information through the sponsoring broker who would pension funds.
(historical and projections). also be involved in selling the instrument
to the wider public through an agreed offer The level of documentation required is fairly
Once the information is received, the period. An advantage of having bonds substantial for a listed debt instrument and
investment advisor after reviewing the offered to the public is that it opens the the process can take longer than accessing
information will engage management on widest possible number of investors. funds from the bank.
clarifications to understand the business
better and identify risks. Another advantage of offering listed bonds However, usually the advantage is longer
is that the investors know that the issuer tenors, flexible terms and possibly better
This process helps in determining the has been complying with the appropriate pricing. Asset managers are also looking
appropriate structure of the instrument. regulations and therefore its affairs are for strong governance structures and up
Input can be received from legal advisors likely to be in order. In addition, the fact to date financial information including
on the structure. If it’s a listed instrument that the Malawi Stock Exchange will also comprehensive financial projections.
that is intended to be raised, reporting oversee the continuing obligations relating
accountants can also be engaged to sign- to the particular bond also strengthens the The regulatory environment for the
off on any financial information on the case for investing in listed bonds. securities market which requires detailed
structure. disclosures from issuers and continuing
obligations presents a better prospect for
A trustee can also be appointed and asset managers to invest in listed debt
empowered to act on behalf of the bond securities as compared to unlisted ones.
holders (investors), in the event that the Banks on the other
issuer fails to make a payment. A fiscal or
payment agent can also be appointed to
hand, based on For an institution looking for an alternative
Reserve Bank of to banks for finance, the debt capital
handle payments to investors. markets could be the next destination
Malawi data, hold
The investment advisor would then K1.8 trillion of
prepare a summary term sheet or teaser
which would then be sent to various asset
assets as at 30 June
managers or other potential investors for 2019. 35% of those
comments. The purpose of the teaser is funds are in loans
gauge interest from potential investors and advances. 40%
prior to entering into legal agreements. is held in short term
This teaser does not form a contractual negotiable securities/
offer for the bonds but rather to assess the Treasury bills.
likely interest of target investors and fine
tune the terms of the bond. The investment
advisor would obtain feedback and amend For a privately issued instrument,
the terms where appropriate. transaction agreements can be signed
off. For a listed instrument, after the
After the teaser terms have been accepted, application for investment is approved,
the investment advisor would then work one would usually get a notification from
on developing a detailed prospectus Central Securities Depository register
or information memorandum. The acknowledging the investment placed.
information memorandum or prospectus Author’s profile
would cover the following areas: Asset managers would go through a credit Emmanuel Chokani, CFA, FCCA is the Chief Executive Officer
for Bridgepath Capital Limited. He was former Chief Executive
analysis to determine whether to invest in Officer of NICO Asset Managers where he managed an investment
1. Use of proceeds the bond or not. For certain thresholds or portfolio of over US$500 million assets under management.
He is a CFACharterholder and Chartered Accountant. He is a
mandates,they would require pension fund member of the CFA Institute (USA), CFA Society South Africa, ICAM
2. Terms and conditions trustees approval to invest in the bond. (Malawi), ACCA and the Corporate Finance Faculty of ICAEW (UK).
Emmanuel has extensive experience in investment management,
corporate finance, real estate development, strategic and risk
management. He previously was the Head of Risk and Compliance
3. Issuer disclosures Key issues being looked at by the asset at NICO Holdings Plc and spent at least 5 years with Deloitte
rising to the position of Audit Manager. Emmanuel graduated
manager from a credit perspective would with Distinction with a Bachelor of Accountancy degree from the
4. Regulatory disclosures be the governance structure of the issuer, University of Malawi.
analysis of the ability to repay, various
18 MSE Magazine Issue 4 2020Issue 4, 2020 MSE Magazine 19
2019 PICTORIAL
2019: A YEAR IN REVIEW
1 2
3 4
5
6 7
20 MSE Magazine Issue 4 20202019 PICTORIAL
2019: A YEAR IN REVIEW
8 9
2019 IN REVIEW
MSE Chairman, Dr. Winford Masanjala, delivering his open-
1 ing address at the Blantyre MSE Bond Market Symposium
at Sunbird Hotel.
Cross section of participants at Blantyre MSE Bond Market
2 Symposium, Sunbird Mount Soche
A participant making his contributions during the panel
3 and feedback discussion session at Blantyre MSE Bond
Market Symposium
Finance Manager & Company Secretary, MSE, MrMadalitso
4 Mittochi making a presentation during the Blantyre MSE
Bond Market Symposium at Sunbird Hotel.
Catholic University students during the 2019 Global Money
5 Week educational visit at MSE
10 MSE staff at the MSE Blantyre Bond Market Symposium
6
Guest of Honor, Honorable Dr. Goodall Gondwe during the
7 Listing of ICON Properties Plc. and launch of financial sec-
tor infrastructure systems at Sunbird Mount Soche.
Catholic University students listening to a presentation
8 during the 2019 Global Money week educational visit at
the MSE
MSE Chairman, Dr. Winford Masanjala and Mr Vizenge Kum-
9 wenda, CEO, NICO Holdings Plc. after the cutting of the rib-
bon during the Listing of ICON Properties Plc.
The Governor of the Reserve Bank of Malawi, DalitsoKa-
10 bambe PhD, delivering his remarks at the launch of finan-
cial sector infrastructure systems at Sunbird Mount Soche.
CEO, Bridgepath Capital, MrEmmanuel Chokani, making
11 a presentation at Blantyre MSE Bond Market Symposium
Industry Captains during the Listing of ICON Properties
12 Plc. and launch of financial sector infrastructure systems at
Sunbird Mount Soche.
CEO, NICO Holdings Plc. Mr Vizenge Kumwenda, delivering
11 13 his speech during the Listing of ICON Properties Plc. At
Sunbird Mount Soche Plc.
12 13
Issue 4, 2020 MSE Magazine 212019 PICTORIAL
2019: A YEAR IN REVIEW
1 5
2
3 6
Mr. Thomson Kumwenda; MyBucks Banking Corporation,
1 making a presentation during the MSE Blantyre Bond Mar-
ket Symposium
Operations Manager for MSE, Ms Kelline Kanyangala mak-
2 ing a presentation during the MSE Blantyre Bond Market
Symposium
Director, Financial Sector Regulation, Mr George Chioza,
3 Reserve Bank of Malawi, delivering his opening address
during the 2019 Global Money week at the MSE.
Father Samuel, Lecture at Catholic University delivering his
4 remarks during the 2019 Global Money week at the MSE.
Former Operations Manager, MrsEsnat Suleman, making
5 a presentation during the launch of Icon Properties and
financial sector infrastructure systems at Sunbird Mount
Soche.
6 MSE, CEO, Mr John Robson Kamanga delivering his wel-
coming remarks during the Blantyre MSE Bond Market
4 Symposium.
22 MSE Magazine Issue 4 2020Issue 4, 2020 MSE Magazine 23
INVESTOR SEGMENT
HOW TO BUY AND
SELL SHARES
Freepik.com
Douglas Nyirenda
T here are so many investment
opportunities in Malawi that the
potential investor and the general
public are not aware of, such as investing
on the stock market. Investing on the
Limited, Cedar Capital Limited,
Continental Capital Limited and
Stockbrokers Malawi Limited. Note that
you can also purchase shares through
an Investment Manager or Collective
hours from your broker of the purchase.
The minimum number of shares you can
buy is one (1).
4. On T+3, (Trade date plus three
stock market means that you become a Investment Scheme. business days), a buyer’s central securities
part owner of the company whose shares depository account will be credited with
you purchase. 2. Select the shares you want to buy shares bought. This is now the case since 7
June 2018 when the Exchange automated
Below are some of the steps and processes From the companies listed on the Malawi its trading platform.
to get started investing on the Malawi Stock Exchange, you select the companies
Stock Exchange. whose shares you wish to buy. You can The automation necessitated the need
solicit the advice of a stockbroker as to of shares to be held in a more secure
Main Steps which shares to buy depending on your electronic form as opposed to physical
investment objectives. form.The Central Securities Depository
1. Approach a stockbroker is housed at Reserve Bank of Malawi
3. Deposit funds into the account
A stockbroker is an agent who facilitates provided by the broker.
the buying and selling of shares on the
Malawi Stock Exchange. As an individual, Once you open an account with your
you cannot trade shares on your own broker, you will be required to deposit
without the services of a registered funds into an account provided by your
stockbroker. broker and notify them of the deposit. It
is worth noting that the funds an investor
Fill in the forms to open an account deposits with the broker is only the
with the broker andcentral securities equivalent to the shares being sought. Douglas Nyirenda is the Senior
Operations & Compliance Officer
depository, at no fee. You are strongly at the Malawi Stock Exchange.
advised to ‘shop around’ for brokers Once the funds reflect in the brokers
as they differ on service even though account, the broker will proceed to For more information, contact Malawi
commissions charged once you buy or sell place an order in our automated trading Stock Exchange on +265 1 824 233
shares is the same. system. Once the shares are available, the or info@mse-mw.com or you can also
trade is executed, and you will receive a contact your nearest broker.
There are currently four stockbrokers in notification (contract note) within 24
Malawi namely Alliance Stockbrokers
24 MSE Magazine Issue 4 2020Issue 4, 2020 MSE Magazine 25
INVESTOR SEGMENT
A GLANCE AT THE MSE DAILY TRADING REPORT
Douglas Nyirenda
T he Malawi Stock Exchange
disseminates its trading report on
trading activity on a daily basis. This
report summarizes the trading activity per
traded company to enable investors make
3. Previous closing volume weighted average 5. The Indices
price, Today’s Closing volume weighted
average price and the volume columns These show the performance of the
market for given period(s). The Malawi
The closing prices are computed as a volume All Share Index (MASI) measures the
informed decisions. weighted average price to reflect all trades that performance of all listed companies.
were executed during the day.
It is important for investors to understand The movement of the index is therefore
this report as it is a source of key information The previous closing weighted average price influenced by movements in share prices
for investment decision making. column shows the last traded price of a company of the various companies in proportion
in question. This could be the previous day’s to their value composition within the
1. The Daily Range closing price, previous week’s closing price or index
previous month’s closing price depending on
This shows the highest and lowest prices a when the company last traded.
share has traded at on a particular day. It is
useful to investors as it shows the price at The today’s closing weighted average price
which the market is willing to buy a share column as the name suggests, shows the closing
in question. price for a company for trades executed on the
day in question.
2. MSE Code, the buy and sell columns
The volume column show the total number
The MSE Code is a unique code assigned of shares traded by a given company on that
to a company at the time of listing. The buy particular day.
column shows the best price an investor is Douglas Nyirenda is the Senior
willing to pay for a share of a given company 4. Analysis Columns Operations & Compliance Officer
at the Malawi Stock Exchange.
whilst the sell column shows the lowest
price a seller is willing to sell a share of a The ratios on the far right subsequent to the For more information, contact Malawi
given company. These can be a good gauge volume column are used by financial analysts Stock Exchange on +265 1 824 233
or info@mse-mw.com or you can also
of demand and supply for each company. when giving financial advice to investors. It contact your nearest broker.
Investors are strongly advised to contact is strongly advisable to contact your financial
their financial advisors. advisor for an understanding of the ratios.
26 MSE Magazine Issue 4 2020Issue 4, 2020 MSE Magazine 27
INVESTOR SEGMENT
UNDERSTANDING
SAVINGS AND INVESTMENTS
Mary Chipofya
IN FINANCIAL LITERACY
T here are two important factors in
financial literacy because, deciding
what to do with extra money is
trickier than you might think. There is
choose to invest in Bonds in order to receive
a steady and visible flow of income.
Share ownership affords shareholders rights
Coordinate and monitor implementation of
National Financial Literacy Program.
This activity was conducted because,
no understating the importance of saving or interests in the management, profits financial literacy promotes effective
money, with one common recommendation and ultimately the assets of a company. management of personal and household
being to save at least 20% of your income Both instruments may also be attractive to
every month. finances and improved access and utilization
investors nearing retirement and seeking of financial services and products among
passive income to replace their earned the country’s population. It is probably one
Whether you are saving a lot of your income.
income or a little, but the question still is, of the most important things one should be
“what should you do with it?” In June 2019, the organization participated familiar with.
in the drafting of the 2020-2024 National
Mostly, your current financial situation and Financial Literacy Program Action We all live in a world of business and to
what you plan to do with the money is what Plan together with stakeholders from narrow that down even more, we all have
your answer will depend on. This is where the Ministry of Education, Science & to account for our own finances such that,
we possibly can distinguish between the Technology, Ministry of Gender, Children, people need to become self-sufficient so
need to save and invest. Disability & Social Welfare, Ministry that they can achieve financial stability.
of Local Government, Ministry of
Saving Information, Ministry of Youth and Sports The Malawi Stock Exchange will continue
Development, Association of Business to work with various stakeholders including
Saving money refers to putting your money Journalist, Media Houses, UN Women,
into cash products that you can withdraw the Media to promote its financial literacy
Financial Industry Association and the initiatives and reaching out to individuals in
from quickly and easily so that you have
your money available if you need it at a Reserve Bank of Malawi (RBM). all sectors of the economy in order to spread
moment’s notice. information on how they can invest on the
The aim was to come up with realistic MSE so that they enjoy the benefits of
Most people save using bank accounts, suggestions relating to the plan, task investing on the stock market and improve
specifically saving accounts. Others usesthe allocation, timescales, etc., with reference
to the following 6 pillars of the plan: their well being for a better Malawi
old shoebox under the bed or the piggy
bank, which is a method not the most
secure and rather tempting to spend it. Delivering Financial Literacy via Educational
Establishments
Investing
Delivering Financial Literacy via mass media
Investing is buying something that you
expect to increase in value, with the point Financial Literacy Program via local and
being to grow your money. Regardless that religious leaders Mary Chipofya is the Business
there is more riskin investing because your Development Officer at the Malawi
investment could drop in value, it still Financial Literacy via strategic partnership Stock Exchange.
holds advantages over saving. Investing has and other initiatives For more information, contact Malawi
the growth potential.When considering Stock Exchange on +265 1 824 233
or info@mse-mw.com or you can also
investing; shares and bonds at the stock Development of resources to support contact your nearest broker.
market are a way to go. Investors may implementation of financial literacy program
28 MSE Magazine Issue 4 2020You can also read
