Wednesday, November 29, 2023

Analysts see light at the end of the tunnel

Financial analysts are upbeat that there is a silver lining for the local bourse in the second half of the year after it plunged into a negative territory last year due to the global financial crisis.

However, they warned that earning will remain depressed and prices would not reflect the true valuation due to the limited number of shares in the market. The market fell with its head upside in the mud by 16.5 percent during last year.

“Going forward is like things will remain stable and inflation will fall within the Central Bank inflationary target by the end of the year,” head of Capital Asset Management, Leutlwetse Tumelo, said in an interview.

However, he pointed out that a number of things will depend on whether there wouldn’t be a floodgate of administrative prices. His view is emboldened by the prices of crude oil in the international market which has been hovering in the range of US $70 per barrel.

The central bank has set itself a target of three-to-six percent inflationary target as a measure of assuring investors it is in control of the monetary policy. And over the past six weeks, Botswana Stock Exchange (BSE) has been showing remarkable stability and price improvement.
Companies like Barclays, First National Bank and Standard Charted Bank have been showing some improvement.

“The market is starting to stabilize and we haven’t had anything bad in the market. News coming into the market has been good,” Stockbrokers Botswana’s Chief Executive Officer, Geoffrey Bakwena, said, adding that, “I hope that we will see some recovery by the end of the year.”

Investec analyst based in Cape Town, Alphonse Ndzinge, told Sunday Standard that although there is a general belief that there is a stability in the market, he holds the view that it is still premature as the market still faces daunting risks ahead.

“There is a lot of uncertainty in the medium term. The economy contracted by 20 percent of the GDP the second quarter and the economy will be under pressure,” he said, adding that “the market will continue to struggle for direction as investors assess the outlook for external trade, fiscal revenue and economic growth.

“We are not anticipating earning as high as last year. And, looking at the valuation, the market is not cheap.
“Valuations are key determinant for assessing the short term stock market outlook, and right now on aggregate the market is not particularly cheap,” he added.

However, he said that there is still some opportunity in the banking sector pointing out that stocks have improved in terms of prices compared to earlier in the year.

“As always, financial stocks will play the starring role in the prospects of the market. Credit growth data suggest that loan book growth remains strong, especially in the mortgage and personal loan segment.

However, he has concerns over credit quality given pressures on consumer spending.


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