Investment management and advisory firm, Alliance Capital, says it sees the stock market remaining vibrant in the short to medium term.
In its February 2018 economic report released on Friday, Alliance Capital says the prevailing relatively low money market rates are expected to strengthen growth of the stock market as investors channel their resources from money markets to the equities market.
Alliance Capital further said the listing of the two-year K5 billion bond and the prospects of more bond listings will deepen the market further, raise activity and increase liquidity.
In a bid to deepen the capital market, the Reserve Bank of Malawi (RBM) on February 26 listed a five-year Treasury Note with a coupon rate of 10 percent. There is a strong indication that a three year Treasury Note will also be listed the near future.
Alliance Capital further says it expects the indicative cost of money to remain at 16 percent.
“Given the risks that the renewed inflationary pressures could pose to the growth momentum, timely initiation of monetary policy measures to anchor inflation expectations and contain the inflation persistence has become essential.
“We expect the RBM to maintain the policy rate at 16 in the near term and only revise it slightly upwards when inflationary pressures persist. Liquidity management operations are not expected to change; as such, we expect interbank money market rates to continue to tightly align with the policy rate,” reads the report in part.
According to the Monetary Policy Committee calendar released on Friday, the committee is expected to have its first meeting for 2018 on March 27 and 28.
Alliance Capital further says it sees the kwacha remaining stable against the dollar in the short term.
“Despite volatility of the pound and rand we expect kwacha to remain range bound against these two currencies and stable against the dollar unless dynamics change,” reads the report.
On inflation, the firm says it sees the general level of prices of goods and services rising further in the coming months with a major push coming from both food and non-food inflation.
Inflation was recorded at 8.1 percent in January up from 7.1 percent in December 2017.
The National Statistical Office last month rebased the Consumer Price Index from 2012 as base year to 2017. NSO also changed the weighting of various items which, among other things, saw the weight of food in the CPI coming down from 50.2 percent to 45.2 percent.
“With the reorganisation of the food basket in the computation of Consumer Price Index purposes, utilities, especially electricity, will weigh heavily on non-food inflation with the new and higher electricity tariffs. Speculative buying of maize is also expected to weigh on food inflation,” reads the report.