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AT THE MARKET WITH ALLIANCE CAPITAL LIMITED

Pension Fund Asset Managers Let us manage your pension fund investments for optimal returns. Call us today. Money Market Brokers We pool funds from many investors and achieve the critical mass and economies of scale to get you better interest rates on your money. Call us for more information. Portfolio Investment Managers Your investment portfolio might comprise any combination of short-term deposits, treasury bills. We can manage your investment portfolio professionally, giving you insightful information on recent and upcoming developments based on our research and knowledge of the market. Try us. Share Investment Services Trust us to give you objective advice when you want to buy or sell shares and allow us to handle the transaction on your behalf. You only pay the normal stockbroking fee! Corporate Finance Advisors Contact us for business plans, capital raising, strategic planning, balance sheet restructuring, due diligence, company valuations, pre-listing and listing advice.

CONTACT US NOW FOR FINANCIAL ADVICE AND YOUR INVESTMENT MANAGEMENT NEEDS. Christian Majavina and Charity Mhango cmajavina@alliancecapitalmw.com/cmhango@alliancecapitalmw.co Market Review Week Ending 4 January 2013 Vol.1/2013

PROS AND CONS OF DIFFERENT EXCHANGE RATES-SYSTEMS


Money Market The Financial market continues to experience liquidity crisis as the Inter- Bank activity for the week under review averaged MK 7, 670 with only 46.9% being collaterized, at a weighted average rate of 25.95%. Discount Window Accomodation bounced back strongly, averaging MK 13.2bn as most banks resort to borrow through the Discount Window as it is cheaper (25%) compared to interbank rate.
INTERBANK RATE

Source Reserve Bank of Malawi

Foreign Exchange The Gross Official reserves closed higher on 28 December 2012 with US$ 223m, a 13.8% increase week on week. This propelled the import cover by 15 days from 1.04 months to 1.19 months. During the week, the local unit weakened against the USD and ZAR but it closed marginally higher against the GBP and EURO. The USD traded at 0.6% higher than last week and the Rand gained 0.003 points against the Malawi kwacha. The GBP on the other hand lost ground against the Local unit from MK 559.42 to MK 558.32. The Euro traded at MK 458.16.

%
29.00 26.00 23.00 20.00 17.00 14.00 11.00 8.00

Month-on-Month: January 2012/2013

FOREIGN EXCHANGE CCY January 2012

Mid Rate Week end 28-12-12

Mid Rate Week end 04/01/13

USD GBP Rand Euro

163.6180 253.5261 20.0100 209.2347

337.000 559.4188 41.9061 465.2252

339.000 558.3191 41.9093 458.1564

Source: Malawi Stock Exchange

Source Reserve Bank of Malawi

Treasury Bill yields recorded mixed movements as the 91 day inched 3.44 percentage points up to close the week at 24.33% from 20.11% the previous week. The 182 day tenor on the other hand lost 0.07 percentage points to close at 24.71%. The 364 day paper had no applications; the last recorded yield for 365 day paper two weeks ago was 26.40%.
MALAWI GOVERNMENT TREASURY BILLS AUCTION RESULTS 2 January 2013 Tenor Announced Applied Allotted Average (Cost)KM (Cost) KM (Cost) KM Yield %
91day 182day 364day Totals 300.00 400.00 800.00 1,500.00 11.03 2.49 0.00 13.52 11.03 2.49 0.00 13.52 24.33% 24.71% -

31-Jan 29-Jan 27-Jan 25-Jan 23-Jan 21-Jan 19-Jan 17-Jan 15-Jan 13-Jan 11-Jan 9-Jan 7-Jan 5-Jan 3-Jan
Jan-12 Jan-13

The Stock Market A total of 151,957 shares from four counters traded during the week under review in eight deals. MPICO (-4.2%, MK 2.30) NBM, NBS and TNM were the active companies. The MASI closed in red (-0.05%, 6012.79) due to the decrease in Domestic Share Index by 2.17 points from 4725.51 to 4723.34 on the back of declining MPICO.
STOCK MARKET INDICATORS Index Dec 2011 Week-Ending 28-12-12 Week-Ending 04-01-13

MASI DSI

5369.42 4238.39

6015.51 4725.51

6012.79 4723.34

Source: Malawi Stock Exchange

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8000 6000 4000 2000 0

Money Market Broking, Share Investment Service, Corporate Finance Advisory, Portfolio Investment Management, Pension Fund Asset Management.

MASI DSI

Email: cmajavina@alliancecapitalmw.com cmhango@alliancecapitalmw.com Tel : 01 830 704/705/687

Pros and Cons of Different Exchange-Rate Systems


In May 2012, the Malawi government floated the local unit moving away from the fixed exchange rate system. Since then people have been debating the pros and cons of applying either systems. The primary argument for a floating exchange rate is that it allows monetary policy to be used for other purposes. Under fixed rates, monetary policy is committed to the single goal of maintaining the exchange rate at its announced level. Yet the exchange rate is only one of many macroeconomic variables that monetary policy can influence. A system of floating exchange rates leaves monetary policymakers free to pursue other goals, such as stabilizing employment or prices. The Malawi government in its recent press release on the achievements of the ERP noted that all neighbouring countries have low inflation rates because of relatively stable exchange rates not through fixed exchange rates but because of trade and exchange rate liberisation. Other advocates of fixed exchange rates argue that exchange-rate uncertainty makes international trade more difficult, they also sometimes argue that a commitment to a fixed exchange rate is one way to discipline a nations monetary authority and prevent excessive growth in the money supply. Yet there are many other policy rules to which the central bank could be committed. Fixing the exchange rate has the advantage of being simpler to implement than these other policy rules, because the money supply adjusts automatically, but this policy may lead to greater volatility in income and employment. In the end, the choice between floating and fixed rates is not as stark as it may seem at first. During periods of fixed exchange rates, countries can change the value of their currency if maintaining the exchange rate conflicts too severely with other goals. In all fairness, we rarely observe exchange rates that are completely fixed or completely floating. Instead, under both systems, stability of the exchange rate is usually one among many of the central banks objectives. Bottom line is that the country is consuming more than it is producing. The economy needs to move towards more productivity, value addition, import substitution and increased exports. Food security is another critical component, we must produce enough food. At the same time, impact of the much taunted fertiliser subsidy must be reviewed. Motivational quote of the week Obstacles dont have to stop you. If you run into a wall, dont turn around and give up. Figure out how to climb it, go through it or work around it Michael Jordan To start investing now, Contact: Christian Majavina or Charity Mhango for;

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