The Malawi Stock Exchange (MSE) on Monday made history when, for the first time since 2010, it registered trading on the government bond.
The security, with the symbol T05NT, traded a total of 1,000 certificates with a face value of K1 million at a price of K84.3890.
The trade breaks the dry spell that was witnessed for government securities that are listed on the debt platform of the market.
A statement released by the MSE indicates that the market has deployed a number of initiatives to spur activity of the market.
They include capacity building of its members, incorporation of commercial bank dealers as participants for debt trading in the Automated Trading System and foregoing of commission earned by members on debt trades.
“The MSE has registered significant progress in meeting the criteria that was established under the Committee of Sadc Stock Exchanges (CoSSE) on centralisation of secondary bond trading on Sadc Stock Exchanges.
“In total the MSE has met 11 out of the 15 indicators that were isolated. The outstanding indicators include provision of a mobile or online trading platform for debt securities, primary dealership, market making and availability of bond indices,” the statement reads.
In an interview, MSE Chief Operating Officer Kelline Kanyangala said the trend is common in the region, especially among institutional investors.
“Institutional investors just buy and hold on to the securities because there is a limited number of investing securities, be it equity or other listed securities. Sometimes they don’t want the risk of selling that security and have nowhere else to invest the money; so, they would rather buy and hold to maturity.
“As time goes by, we should see a lot of activity’ Last year, we had two trades from Mybucks and this year we have seen trading of this government security. So, it is indicative of an improved situation on the market,” Kanyangala said.
Commenting on the development, financial markets analyst Thokozani Saulosi said this will entice the investors in investing in bonds as they know that there is liquidity in the market for those securities should the need be to disinvest.
“I hope this sends a message to the market that bonds can be traded in the secondary market and individual investors can also participate in any bond as there is a readily available market for secondary trading,” Saulosi said.
Stockbrokers Malawi Limited Chief Executive Officer Noel Kadzakumanja rated the development as positive.
He said, usually, investors do not trade government securities because security holders are mostly institutions which prefer holding on to the instruments to maturity.
Government, through the Reserve Bank of Malawi, has supported the deepening of the debt market through listing of government debt securities, of which there are presently 44 government debt securities listed on the exchange.