Malawi Stock Market Commentary – Week Ending December 2, 2011

Active counters during the week were; OML, TNM, Standard Bank, PCL, NICO (-12.0%), NBM, MPICO, Illovo and FMB. Turnover decreased to MWK 39m from MWK 54m registered last week. MASI lost 37.23 points to close at 5,341.6 representing a loss of 0.7% w/w and a gain of 8.2% YTD. 1m NBS letters of allortment changed hands during the week at MWK 0.20 (MWK 9.80).

The Malawi Government is on the verge of securing a USD 180m (MWK 30bn) credit line from India for buying fuel. Ministry of Energy, Natural Resources and Environment and the Reserve Bank of Malawi confirmed that talks are at an advanced stage. They both declined to give specifics of the deal, explaining that they can only do so after the loan agreement has been finalised.

Coffee could bring in about USD 200mpa (MWK 33bn) for Malawi if government can subsidise its production, according to an industry leader. The industry can produce between 20,000 and 35,000t of coffee if government sets up a fund similar to cotton’s. Government has this financial year allocated MWK 1.6bn to the cotton sector to increase hectarage to about 200,000 in the hope of generating over USD 300m (MWK 50.1bn) of foreign exchange in the next 12 months. Currently, Malawi produces about 1,500t of coffee annually but the hectarage could be increased by growing the crop in non-traditional coffee districts.

The Malawi government is optimistic that the economic problems currently hitting Malawians will come to an end next year (2012) through employment of prudent actions and not shortcuts. In a statement on the Status of Our Economy, the Minister of Finance outlined various economic hardships which Malawi is suffering from, such as poor performance of tobacco on the market, which has resulted in shortage of forex and erratic fuel supplies. This in turn has adversely affected construction and production industries. This has resulted in the slashing of the projected 2011/2012 GDP growth from 6.9% to 6.0%. The minister further noted that the downward revision was also due to slow growth in the agriculture sector, forex and fuel shortages and intermittent electricity supply.