What P
SM? Yours or your contacts? And where doesn't it show colors? In your contactlist, in the top personal bar? Also, I assume you're talking about Messenger Plus! Live?
Always be specific in your posts so you can be helped out in a decent way (without lots of time consuming post and reply traffic)
And try to use full names of features, especially when you don't know the correct abbrivations 
Otherwise it can be very confusing.
eg: your post might even be interpreted as a Private Message on the forums.
Guessing in what you mean:
If you mean you can't see the colors in your own color formatted PSM (personal message) in the top personal bar in the contactlist, then yes, this is a limitation. People will see your PSM with the proper formatting (provided they have a compatible Messenger Plus! installed).
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