Stock market managers are attributing the local nonresponsive investor trends on the local exchange to an imbalance on the funds to counter ratio.
In most international capital markets, scandal, administrative and policy changes involving listed companies have a bearing on market performance but the case is different here at home.
For example, some counters have in the recent past been embroiled in what could be seen as discrediting news reports and management changes but their counters still registered positive trade during the same period.
Foreign exchanges have also crumbled due to the coronavirus but the Malawi Stock Exchange (MSE) continues to trade normally amid the pandemic.
In the past 3 weeks, NBS plc was caught up in reports of missing funds within the bank, but the counter managed to register a share price gain and several trades in a week after the reports.
This was also followed by the resignation of the CEO of another listed Company TNM plc.
Both the incidents did not really impact changes on the firm’s counters on the bourse.
Commenting on the development, MSE Chief Executive Officer John Kamanga states that the issue resonates with questions that have been there that the local market does not respond to general economic and market dynamics.
“The reason behind is that we have more money supply chasing very few financial assets, as a result you will find that people are investing not based on that a company has done well, but based on the availability of financial asset which is available at that particular time,” Kamanga said.
He stressed that most of the local investors are only interested in the money, considering the low number of counters available.
For over a decade, the country’s capital market has remained under utilised with only 16 listed companies on the MSE.
Apart from this development, the government mandatory pension contribution policy has resulted in a surge in pension funds that are not being invested in projects.
Another Market analyst also expresses concern with the current inbalance arguing it would create what he termed as a possible “asset babble.”
Investment Advisor and Chief Executive Officer of Bridgpath Capital Emmanuel Chokani, said the trend is not healthy for the capital market.
“An assets babble is when you have significant cash chasing few counters and right now we have 16 companies listed and you got these funds on the other side. Last year, 2019 there was K110 billion which came into the sector and this money will be looking for a home.
According to Investment Advisor and Chief Executive Officer of Bridgpath Capital Emmanuel Chokani, the trend is not healthy for the capital market.
“Because we got few places where this cash can go, then the few places that can accept this cash you tend to find that the prices start to increase because there is a lot of money chasing few assets,” adds Chokani
He adds that since the market can’t hold, then there are mismatches.
Chokani therefore calls on the need to develop investment options for such growing funds.
Kamanga echoes Chokani saying there is need to have more products and more listings on the main board.
But there is hope that the market my get more listing in the line of bonds to maximize options for the local investors.