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 [email protected] (265) 1 824 327 Fax: (265) 1 824 353 Email: [email protected] 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: [email protected] [email protected] www.cdh-malawi.com www.alliancestockbrokersmw.com

Non - Members FMBCH Private Bag 122 Blantyre, Malawi +265 1 821 995 [email protected]

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 [email protected] [email protected]

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 [email protected] [email protected]

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 [email protected] [email protected]

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. Page 06 LISTING REQUIREMENTS REVIEWED Be up to date with the current listing requirements on the Malawi Stock Exchange. Page 08 12 RAISING FINANCING Learn how you can raise financing through issuing a bong on the exchange. Page 10 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 12 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 Also Inside investments in financial literacy. Page 28 TRADING IN THE DIGITAL SPACE Foreword The world has become a global village through 2 digital technology. 20 Pictorial Page 30 29 FAQ,s INVESTOR PROTECTION Investors need protection when 34 2019 Trading Summary entering a market. Page 32 10 36 The Corporate Citizen

Issue 4,Issue 2020 4, 2020 MSE Magazine 1 1 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 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 Iof 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 5 Wealth 4, 2020 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 [email protected] or you can also contact your nearest broker.

Kelline C. Kanyangala

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 Twhen 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 MSE MagazineMagazine 7 ISSUER SEGMENT

MALAWI STOCK EXCHANGE LISTING REQUIREMENTS REVIEWED

Madalitso Mittochi

stock market is a highly regulated The review process was also necessitated to 5. The Listings Requirements have market, this is so because investors’ align the Malawi Stock Exchange Listing been revised to be in line with new money needs to be safeguarded at all Requirements with other stock exchanges International Financial Reporting cost.A For a stock exchange to be trusted, its in the region and the rest of the world. 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 Madalitso Mittochi is the Finance Requirements has been revised and Manager and Company Secretary at up with a number of Directives to enhance enhanced implementation of Financial Services Act the Malawi Stock Exchange. 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 [email protected] 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 2020 Issue 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

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: Tdependson 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 2020 INVESTOR 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? Preparation of information benefited from low interest cost 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 Listing structure set up. benefitted from interest income that on the MSE and the following are some is always guaranteed to be above the of many benefits:- Step 2. Listing rate of agreed Treasury bill. 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 could be a much cheaper alternative. are able to earn more from interest Financial reporting. income that is usually higher than in Some are not in debts at all but have 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 11 EXCLUSIVE 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 13 EXCLUSIVE INTERVIEW

Continued from page 13

“I would like to encourage State-owned enterprises such as Malawi Housing Corporation, 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. ANY MESSAGE TO THE BUSINESS we are working on introducing a mobile • Liquidity: You can sell your shares 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 2020 Issue 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 2020 Issue 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 hand, based on For an institution looking for an alternative payment agent can also be appointed to Reserve Bank of to banks for finance, the debt capital handle payments to investors. Malawi data, hold markets could be the next destination The investment advisor would then K1.8 trillion of prepare a summary term sheet or teaser assets as at 30 June which would then be sent to various asset 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: Emmanuel Chokani, CFA, FCCA is the Chief Executive Officer Asset managers would go through a credit 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 portfolio of over US$500 million assets under management. the bond or not. For certain thresholds or 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 (Malawi), ACCA and the Corporate Finance Faculty of ICAEW (UK). 2. Terms and conditions trustees approval to invest in the bond. 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 2020 Issue 4, 2020 MSE Magazine 19 2019 PICTORIAL

2019: A YEAR IN REVIEW

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20 MSE Magazine Issue 4 2020 2019 PICTORIAL

2019: A YEAR IN REVIEW

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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 6 MSE staff at the MSE Blantyre Bond Market Symposium Guest of Honor, Honorable Dr. Goodall Gondwe during the Listing of ICON Properties Plc. and launch of financial sec- 7 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.

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Issue 4, 2020 MSE Magazine 21 2019 PICTORIAL

2019: A YEAR IN REVIEW

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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 2020 Issue 4, 2020 MSE Magazine 23 INVESTOR SEGMENT

HOW TO BUY AND

SELL SHARES Freepik.com

Douglas Nyirenda

here are so many investment Limited, Cedar Capital Limited, hours from your broker of the purchase. opportunities in Malawi that the Continental Capital Limited and The minimum number of shares you can potential investor and the general Stockbrokers Malawi Limited. Note that buy is one (1). Tpublic are not aware of, such as investing you can also purchase shares through on the stock market. Investing on the an Investment Manager or Collective 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 Douglas Nyirenda is the Senior equivalent to the shares being sought. 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 [email protected] 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 2020 Freepik.com

Issue 4, 2020 MSE Magazine 25 INVESTOR SEGMENT

A GLANCE AT THE MSE DAILY TRADING REPORT

Douglas Nyirenda

he Malawi Stock Exchange 3. Previous closing volume weighted average 5. The Indices disseminates its trading report on price, Today’s Closing volume weighted trading activity on a daily basis. This average price and the volume columns These show the performance of the Treport summarizes the trading activity per market for given period(s). The Malawi traded company to enable investors make 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 whilst the sell column shows the lowest at the Malawi Stock Exchange. 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 when giving financial advice to investors. It or [email protected] or you can also of demand and supply for each company. 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 2020 Issue 4, 2020 MSE Magazine 27 INVESTOR SEGMENT

UNDERSTANDING SAVINGS AND INVESTMENTS Mary Chipofya IN FINANCIAL LITERACY

here are two important factors in choose to invest in Bonds in order to receive Coordinate and monitor implementation of financial literacy because, deciding a steady and visible flow of income. National Financial Literacy Program. what to do with extra money is Ttrickier than you might think. There is Share ownership affords shareholders rights 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 from quickly and easily so that you have initiatives and reaching out to individuals in 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 allocation, timescales, etc., with reference specifically saving accounts. Others usesthe their well being for a better Malawi old shoebox under the bed or the piggy to the following 6 pillars of the plan: 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 Stock Exchange on +265 1 824 233 the growth potential.When considering or [email protected] 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 2020 FREQUENTLY ASKED QUESTIONS

What is the ATS? How many Stockbrokers are in Malawi? Will I pay any taxes on income earned?

ATS stands for Automated Trading System. There are currently 4 Stockbrokers 10% withholding tax is deducted on The ATS is an electronic web-based system operating in Malawi. Stockbrokers Malawi dividend income. 30% tax on capital gains used for placing and matching of investor’s Limited, Continental Capital Limited, is applicable only if you buy and sell your orders on the Malawi Stock Exchange. Cedar Capital Limited and Alliance shares within a period of one year. If you Stockbrokers Limited. hold your shares for a period of over one What to do when I want to buy shares? year no capital gains tax is payable. What are the benefits of owning shares? The first step is to contact a Stockbroker. How do I know which shares to buy? The Stockbroker will assist you to open When the company makes profits some of an account with the Central Securities it is distributed to shareholders as dividend If you are new to investing in shares, Depository and thereafter place orders on income. When the share price of the your Stockbroker will provide you with the market on your behalf. company increases shareholders benefit investment advise that is in line with your from capital gains. Shares can also be used investment goals. The Central Securities Depository is a as a collateral for loans and are liquid and financial institution that holds shares in tradable on the Malawi Stock Exchange. How much time does it take for one to electronic form. In Malawi, this is done at receive their shares? the Reserve Bank of Malawi. What are the costs involved? An investor must expect to receive their Who is a Stockbroker? The Stockbroker will charge you a standard shares within 3 days after the order is commission of 2% for transactions below executed on the stock market. Please note These are companies that buy and sell MK50,000, 1.5% for transactions between that the shares will be reflected in your shares on the Malawi Stock Exchange on MK50,000 and 1% for transactions in Central Securities Depository account behalf of investors. excess of MK100,000.

Issue 4, 20202020 MSE MSE Magazine Magazine 2929 INVESTOR SEGMENT

Stock Digital Trading in the Digital Space

Aubrey Kanje

nnovative technologies have emerged been offering an online market for For new investors that have not digitally and these have led to the mass usage of trading listed company stocks and bonds. traded before on this new online digital trading over the internet. For Having a prefunded market ,stockbroker platform, Initially the stockbroker will Iinstance blockchain technologies such systems are not accessible to investors have to open up an electronic wallet or as crypto currency are being traded over over the internet however investors are account on behalf of the investor. different internet markets on an hourly able to prefund using other local banking and minute basis. and mobile money platforms. These newly open accounts/e-wallets will store all traded shares in a system called Digital trading can be defined as the the central security depository (CSD), buying and selling of digital deliverable only the broker has access to this system. products or services over a private network or the internet. Following automation, the Malawi Stock Exchange introduced two products In contrast to ecommerce, Digital trading that offer different access to market is delivering digital products or services participants and brokers to fully engage in different forms such as bitcoins, digital them in the digital trading activities shares, digital money stored in electronic happening on the MSE. wallets (e-wallets) rather than having 1 them delivered to your door step. The first product, View Only terminal (VOT) gives participants access to view Digital trading has globally contributed market activity in real time. Further, to the economies of many countries most participants are also given access to of them being among the G20 economies. customizable historical reports dating back to the day of go live in June 2018. In June 2018, the Malawi Stock Exchange (MSE)went digital by automating its The second product is known as MSE trading activity which replaced the call Cloud which is offered to members of over sessions.The MSE has since then 2 the Exchange so that they can access the

30 MSE Magazine Issue 4 2020 INVESTOR SEGMENT

Stock Digital Trading in the Digital Space Aubrey Kanje ICT & Networks Officer

trading platform using the Exchanges devices, Just the way mobile money VPN at a lower cost and fast speeds. digital services are doing to fully leverage digital trading To fully utilize digital trading and to enjoy its economic benefits, the MSE has taken its first initiative by automating the In November 2017, the Malawi stock market and bringing it online for Stock Exchange turned a new public access.Now it would be important leaf by automating the trading for other market players to take the same platform at the exchange. path. 3 The purpose was to automate On other markets, broker systems are the exchanges’ trading in found online making it easy for investors eqities and debt securities. to simply transfer funds/prefund theirbroker accounts. This has in turn ushered in efficiency, growth, development, transparency In real-time the investor is able to place and increased outreach orders, trade and check balance without through the internet. having to physically be in the country or make phones calls to their brokers. Pictures in this article refer Aubrey Kanje is the IT and Net- investors can keep track of their accounts to some of the historic works Officer at the Malawi Stock and also transfer their wallets to other moments relating to the Exchange. brokers all online and in real time. automation of MSE such as the launch of the digital For more information, contact Malawi Later in the coming years the MSE wishes platform at the Malawi Stock Stock Exchange on +265 1 824 233 to bring digital trading services right at Exchange (1) and the last day or [email protected] or you can also the palm of your hands using apps on of call over trading (2&3). contact your nearest broker. smartphones and other USSD enabled

Issue 4, 2020 MSE Magazine 31 INVESTOR SEGMENT

INVESTOR PROTECTION

Reserve Bank of Malawi

nvestments are crucial for individuals’ after a certain period of time. The main What is critical to investors, prospective and a country’s social and economic objectives of an investor are preservation as well as existing investors, is to develop a well being. A country cannot ensure of the original investment (the principal), clear understanding of how they can protect Ieconomic stability and create jobs for its steady income and capital appreciation. their investments while striking a balance citizens if there is no flow of investors and between risks associated with investments investments. Investors are individuals or However, the primary concern for many and profits on the invested capital. institutions who save money and use their investors worldwide, Malawi inclusive,is savings to buy income earning assets such to how to protect their investments to WHAT IS INVESTOR PROTECTION as shares, bonds, real property or starting a maximise returns and minimize a risk of business. losing their capital or savings. Investor protection involves various measures than can be put in place to protect There is a big difference between a mere Although there is need for investors to investors money, objectives and their saver and an investor. Savers are people who strike a balance between risk appetite and interests and ensure that investors continue become satisfied with a mere accumulation return on their investments, recent research to get a return on their investments. of money in their savings accounts. Every shows that many Malawians who have the day savers may go to Auto-Teller Machimes potential to invest, especially in the financial In any financial market, including Malawi’s (ATMs) or their bank’s counters just to investment marketplace (stock market),are financial market, investor protection is the check balances in their savings accounts afraid to do so for fear of losing their money responsibility of three key stakeholders: and are happy when their savings are intact. due to unforeseen economic turbulences, Investors, regulatory authorities and the suspected fraud or any undesirable market capital market players. On the other hand, an investor has a force that may come into play and erode deliberate plan to save for investment their investments. HOW ARE MALAWIAN INVESTORS purposes. Investors interests and objectives PROTECTED are to grow their assets and let their Despite all this, the truth of the matter is investments make money or profits for that an investors stand a better chance of In Malawi, there a number of mechanisms them. earning more money than they could if they that have been put in place to ensure had simply saved their money in traditional investor protection including establishment An investor is therefore a person or an saving instruments such as ordinary savings and enforcement of investor protection entity that commits savings/capital with the accounts or at home. legal and regulatory, supervision of financial expectation of receiving a financial return investment service providers, provision of

32 MSE Magazine Issue 4 2020 IINVESTOR SEGMENT investor complaints redress mechanisms circles that the greater the risk, the higher investment period and promotion of investor education. the reward, taking unnecessary risk in investing is often avoidable. 4) Beware of investment fraud This article focuses on how investors can be protected through financial education. Investors may best protect themselves One of the many challenges that investors against risk by spreading their money face and erodes investor protection is the HOW CAN INVESTORS BE across various investments. This is on issue of investment fraud or theft by con- PROTECTED THROUGH FINANCIAL understanding that if one investment fails artists.Nevertheless, there are a few tips that EDUCATION or loses money, the other investments will prospective investors may use to protect make up for the losses. themselves from fraud. An informed investor is a protected and safeguarded investor. A knowledgeable This strategy is known as diversification. It 5) Stop and think before acting investor has the potential to protect simply implies that an investor should never himself from investment risks and potential put all their eggs in one basket.Furthermore, Investors should never invest merely on malpractices by the financial investment it is also best to keep in mind that once a the basis of a sales pitch. They have to get service providers including fraud. In this person has saved money for investing, they written information first and evaluate it. context, investor education refers to the have to carefully consider their options and This due to the fact that the first priority awareness and knowledge that investors think about what diversification strategy of people who sell investments is to make have about various investment options, makes sense for them. money for themselves and their employers risks associated with each option and how and not to ensure investor protection. to choose the best option in order to achieve 2) Do some research on your investment their present and future financial goals. option As such, investors have to carefully review the investment agreement before signing Among others, Malawi under the National Conducting some research on your and commiting themselves. Financial Literacy Program, which was investment option is critical and of high established in 2012,promotes investor importance. An investor should make 6) Study the investment agreement and education implementation of various sure that they have the right information solicit input from experts. financial education initiatives such as concerning the investment they are integration of investor education in the committing to. An investor has to read and understand the national school curriculum, workplace investment agreement to determine how financial education initiatives, symposiums, Furthermore, they should never be afraid to the investment is going to make money global money week. ask questions concerning their investments for him. It is also advisable to seek counsel or the people who can help them to choose of someone more knowledgeable such as In a nutshell, there are several key points the best investments for themselves. Some of a trusted banker, broker, accountant or an that both prospective and current investors the crucial questions a prospectiveinvestors experienced investor before investing in have to understand and keep in mind may ask to ensure that their investments are something. in order to protect and safeguard their protected include: investments: 7) Stick to what is clearly understood a) How much will I be paying for this investment, both in upfront costs and Investors need to stick with what they management fees? can clearly understand, particularly when it comes to potential risks and rewards.It b) Is this seller or broker licensed? is imperative to never sign papers before A reading and understanding them. c) Is this investment registered? knowledgeable 8) Apply critical thinking skills investor has d) How do the risks compare with the potential rewards? Prospective investors should ask themselves, the potential “is what am being promised in reality to protect e) Do I understand the investment? making sense?” This is important because although the Registrar if Financial himself from f) Where can I turn to for help if something Institutions regulates and supervises service investment risks goes wrong? providers in the investment marketplace, the best forms of investor protection are and potential 3) Monitor the performance of your good critical-thinking skills and a sound malpractices investment decisionmaking model to determine the by the financial legitimacy, viability and risk levels of any Timely monitoring of the performance investment model investment of your investment is paramount and key service providers to investor protection. Investing makes it possible for the money to work for the including fraud. investor. As such it is sensible for investors to keep a close watch on how the money is working for them.

However, the investors have to make sure The Consumer Protection and Financial that they do not monitor their money too Literacy Division I Financial Sector Regulation Reserve Bank of Malawi I P.O. often or too little as most investments are Box 565 I Blantyre Malawi I Tel: 01820299 long term and require time for an investor 1) All investments take a risk. to start seeing the benefits of investing.The Email:[email protected]/ investor has to strike a balance in trying to [email protected] Although it is frequently said in business see how their money is doing for them and

Issue 4, 2020 MSE Magazine 33 TRADING SUMMARY

34 MSE Magazine Issue 4 2020 TRADING SUMMARY

Issue 4, 2020 MSE Magazine 35 ISSUER SEGMENT

Old Mutual THE BETTER CORPORATE CITIZEN

ld Mutual (Malawi) Limited pioneered and continues to champion financial literacy in Malawi. In 2014, Old OMutual (Malawi) Limited introduced a financial education programme under the trademarkname,ON THE MONEY. This article provides an aerial view of the Old Mutual financial education “So far, over 1,430,198 provision in Malawi. people have been Old Mutual’s investment in financial education aims at equipping Malawians with the tools to manage personal finances as a means to reached in the year realise their goals and dreams. It also empowers individuals, families and ultimately, the entire nation to end poverty. Old Mutual offers financial education at no cost to Malawians as part and parcel of its 2019 alone. corporate social responsibility to the community.

At Old Mutual, we understand that it is possible for one to attain one’s financial dreams and goals. However, for most people, themyths, motivation,behavior and attitude towards money do not provide an enabling environment for one to realise their financial goals. Hence, a deliberate approach was taken by Old Mutual to assist Malawians to highlight these and accompany Malawians on a journey to change their behavior and attitude towards money.

So far, over 1,430,198 people have been reached in the year 2019 alone. Delivery of ON THE MONEY program targets all groups of people such as corporates, informal markets, entrepreneurs, and youth and women groups. In 2019, OM Malawi’s ON THE MONEY programme was offered to Institutions such as the Immigration Department, Malawi Housing Corporation (MHC), Malawi Defence Force (MDF), Nyasa Big Bullets, YES Summit, Project Innovation Centre, professional bodies and Village Savings and Loans Groups.The general public is reached through mass media, Agro dealers and cooperatives, and digital methods.

As a way of enhancing ON THE MONEY delivery, in 2017, Old Mutual partnered with Tingathe Malawi, a local NGO which provides non-formal free and holistic vocational skills trainings to Mr Benard Chiluzi Financial Education Specialist posing with young people from the most vulnerable backgrounds in Lilongwe. Catholic Institute (CI) women after a Financial Education Old Mutual provides financial education trainings to all learners in presentation. The main picture shows the 2018 Tingathe addition to financial support. This has seen 1,405 people graduating graduates. from Tingathe Malawi since 2017 to 2019

36 MSE Magazine Issue 4 2020 Issue 4, 2020 MSE Magazine 37 38 MSE Magazine Issue 4 2020