Expectations are high that the Malawi Stock Exchange (MSE) will continue on a bullish run on the basis of the recent downward revision of the policy rate by the Reserve Bank of Malawi (RBM) coupled with improved performance of the most listed companies during the first six months, according to market experts.
Commentators are of the view that the recent policy rate cut from 22 percent to 18 percent has resulted in shifting of investor attention from the money market to the stock market.
Further, with most listed companies reporting positive strides in the first half of the year, they say, it may entice most investors into the capital market, thereby increasing demand.
According to Alliance Capital, says, the stock market will continue exhibiting a bullish run going ahead with possibility of improved share prices.
The firm, however, says in other cases there has been no direct correlation between share price movement and listed companies’ performance, saying in some notable situations, companies announce a strong financial performance but the prices remain constant or still drop.
“This brings the idea that it is not always that there is a positive correlation between the company performance and the stock prices,” indicates the firm.
However, the Alliance Capital Limited’s commentary states that theoretically, expectation is that performance of companies should have a positive correlation with its prices.
Statistics show that there has been an increase in prices in all counters in the first half of 2017 except for two listed companies.
“However, some counters for example, NBS Bank have been volatile particularly due to poor performance and maybe the Rights Issue also played a part and Nico has suffered losses due to the unexpected performance in 2016 but has since gained its momentum and is currently doing well,” indicates firm.
In a telephone interview, Chief Executive Officer for stockbroker, Alliance Africa Malawi, Armstrong Kamphoni, said instilling investor confidence is the way to go if the market to remain competitive.
“Investors would invest in companies that have a good performance and that influences performance of the market,” he said.
And in a separate interview, Stockbrokers Malawi Limited Chief Executive Officer, Noel Kadzakumanja, painted a positive picture of the market,
He said with hope for companies to close the year on a comparatively positive note, this may influence share price movement at the local bourse.
“I expect that the positive trend will continue and companies will continue doing well and report positive performance by end of the year.
“This will influence continued upward movement of the Malawi All Share Index, against the background of reduced performance last year,” said Kadzakumanja.