Malawi Stock Exchange: a beginner's guide

The Malawi Stock Exchange, usually called the MSE, is where shares in many of Malawi's best-known companies are bought and sold. If you are thinking about investing in Malawian companies, understanding how the MSE works is a good first step. This guide covers what the exchange is, how it is regulated, how trading works and what to think about before you take part.

What the Malawi Stock Exchange is

A stock exchange is a marketplace for shares. Companies list their shares on it so that the public can buy and sell them. The exchange matches buyers with sellers, publishes prices and sets rules that listed companies must follow.

The MSE is Malawi's national stock exchange, based in Blantyre. It was established in the 1990s to give Malawian companies a way to raise money from the public, and to give Malawians a way to own part of those companies.

Who regulates it

The capital market in Malawi is supervised by the Reserve Bank of Malawi, which licenses market players such as stockbrokers, investment advisers and fund managers under the country's securities laws. The exchange also has its own listing rules, which set out what a company must do to be listed and keep its listing, such as publishing financial results on time.

Regulation does not protect you from losing money if share prices fall. It is there to make sure the market is fair, that companies disclose important information, and that the firms handling your money are authorised.

What is listed on the MSE

The MSE lists ordinary shares in companies from sectors such as banking and finance, insurance, telecoms, agriculture, manufacturing, tourism and retail. Some of these companies are Malawian, while others are subsidiaries of regional groups. Other securities, such as government bonds, may also be traded.

The exchange publishes an up-to-date list of listed companies, their latest prices and announcements on its website. That list is the most reliable source, because companies can join or leave the exchange.

How prices and indices work

Each share on the MSE has a price set by trading. When more people want to buy a share than sell it, the price tends to rise; when more want to sell, it tends to fall. Prices are published after each trading day.

The exchange also publishes indices, numbers that track the overall movement of a group of shares. An index helps you see whether the market as a whole has gone up or down, without looking at every company one by one.

A rising index does not mean every share rose, and past rises do not tell you what will happen next.

How trading works

You do not trade on the MSE directly. Orders are placed through a licensed stockbroker, a firm authorised to trade on the exchange.

Here is what happens when you buy:

1. You open an account with a licensed stockbroker and complete their identity checks.
2. You send money to your account and place an order, saying which company, how many shares and your maximum price.
3. The broker submits your order to the exchange, where it is matched with a seller at an agreed price.
4. After settlement, the shares are recorded in your name in the central securities depository, an electronic register of who owns what.
5. As a registered shareholder, you receive company reports, may be invited to vote at meetings and receive any dividends the company pays.

Selling works the same way in reverse. How quickly you can sell depends on whether there are buyers. Some MSE shares trade often; others can go days or weeks without a trade. This is called liquidity, and it is worth checking before you buy.

Costs of investing on the MSE

Each trade usually carries a broker's commission plus fees charged by the exchange and the regulator. Dividends may have tax deducted before they are paid to you. Ask your broker for a full breakdown before you invest, and work out what the total cost means for the amount you plan to put in.

Dividends and company events

Many companies listed on the MSE pay dividends. A company announces the dividend amount and the date by which you must own shares to receive it. If you are a registered shareholder on that date, the dividend is paid to you, usually into your bank or mobile money account.

Companies also announce results, rights issues (offers to buy extra shares) and other events. These are published on the exchange's website, so it is worth checking it regularly if you hold shares.

Things to think about before you invest

• Understand the business. Read the company's annual report and latest results.
• Think long term. Prices move up and down. Money you need soon is better kept somewhere you can reach it quickly.
• Check liquidity. Make sure you could sell if you needed to.
• Spread your risk. Holding several companies, or a fund, reduces the effect of one company doing badly. Our guide What is an ETF? explains one way to do this.
• Use authorised firms only. Check that your broker is licensed.

Key points

• The MSE is Malawi's stock exchange, based in Blantyre.
• It is overseen by Malawi's financial regulator and has its own listing rules.
• Trades go through licensed stockbrokers and shares are held electronically in your name.
• Check prices, liquidity, fees and taxes before you buy.
• Share prices can go down as well as up.

For a step-by-step walk-through, read how to buy shares in Malawi. If you are completely new, start with What is a share?, or see how Ziki works.