BSEL’s new market maker saves BTCL stock from further fall

15 Mar 2019

By Victor Baatweng

The stock of BTCL at the Botswana Stock Exchange Limited (BSEL) was saved from further decline by the participation of the market maker in the last few days of February, so says financial analysts at Motswedi Securities.

Motswedi Securities is a local stock brokering company based in the capital Gaborone.

BSEL’s most recent weekly trading data shows that BTCL’s first movement for the year saw the stock’s price depreciate some 5.3 percent in February – falling from its year opening price of 95 thebe to its 12 month rolling low of 90 thebe.

According to research analyst at Motswedi, BTCL remains the worst performer on an annualised basis at - 5.3 percent.

Available capital markets data shows that for the year 2018, the local teleco was at the top of the losers at -48.4 percent after the company’s six month interim financial results came back on the lower end of flat.

In a detailed analysis of the BTCL stock last week, Motswedi Securities said that February was somewhat a recovery month for the stock in terms of its contribution to the total market liquidity. BTCL contributed 2.1 percent to the month’s total liquidity relative to the market, a climb up from January’s 1 percent contribution.

Ever since listing at the local bourse in 2016, the BTCL stock has been under pressure a couple of times.  There are various reasons that can be pegged to the declining of BTCL share price according to Motswedi Securities.

REDUCED DEMAND: BTCL had very little demand in January 2019, which allowed for the shares that were in the overhang from that month to spill over into the new month, thus flooding the supply gates in February

2019. This further supported the “buyers’ market” position for the stock. A buyers’ market is a situation where the supply of a particular stock is plentiful or oversupplied, which results in the buyers gaining the ability to negotiate the price of the stock lower for their benefit. This can be seen in the stock’s loss of 5 thebe in the month, which we believe could have steepened had the Market Maker not participated when it did.

Ex-Dividend: Most investors who are selling were simply locking in profits from their dividend gains. BTCL was trading ex-dividend for the better part of the month, which provided justification for investors to sell out as they had already qualified for the dividend. The cashing out motion for those investors, who believe in physically receiving the dividend payout before selling, also added to the excess supply in the market, once the payment date for the dividend came to pass.

TRADE RESTRICTIONS:  BTCL is unable to unlock its growth as its shareholding is restricted to the citizens of the country only. This causes a lot of volatility in the stock’s price as retail investors do not normally look into the fundamentals of the company or the on goings of the industry to determine when they sell. When the price falls due to a seasonal effect such as the “January Effect” or when investors are booking profits, they normally come out in hoards to the market selling, in fear of losing out. This behaviour however has the consequence of putting pressure on the price which may drive it further down.