Saturday, October 20, 2012

Malawi Stock Exchange

I recently bought some shares on the Malawi Stock Exchange (MSE). I wanted to do a little research to see how it is regulated.  The MSE started in 1996. The MSE is regulated by the Capital Markets Development Act of 1990 (Cap 46.06). Some of the rules are available on the MSE website.  A Securities Act is also in the process of being formally passed.

In general, the laws are extensive enough to set up a functioning Exchange. 13 companies are currently listed. Malawi is still very poor. When I visited the MSE this past summer the CEO described it as a frontier exchange. That does seem accurate. As it grows it and the other financial infrastructure dose as well, there will need to be more regulation. 

Recently also, the International Bar Associations’ Human Rights Institute (IBAHRI) released a Rule of Law analysis of Malawi. The aim of the report was to assess the state of the rule of law in Malawi. Emphasis was placed on assessing the independence of the judiciary and the legal profession. I think that it is a positive that the IBA attempts these kinds of missions but the report did, as usual, seemed skewed to push the donor agenda of making African countries more Western. Part of the review was to criticize Malawi for its enactment of a law criminalizing homosexuality. I have been to several IBA meetings and it has always been my impression that it serves the interests of large well funded law firms and organizations. It always touts the standard line. The report did draw attention to the 2011 unrest in Malawi and the death of a student activist critical of the government.   

Malawi currently has some inflation and growth has slowed. The outlook is for continued slowing. I have always been a contrarian investor. I like buying equity which can perform well even in weak economic conditions.

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