By Bonnie Modiakgotla
The Botswana Stock Exchange’s benchmark index, the Domestic Company Index (DCI) which has battered since 2015 could get a nudge up this year as the recently demutualized company introduces a raft of initiatives to grow the stock market, while also stimulating citizen participation.
In the last three years, the BSE’s index has been hit by a rout, declining by 11.3 percent in 2016, then a major recovery in 2017 in which the index narrowed its losses to 5.8 percent, before plunging again to about 11.1 percent loss last year. The poor performance has been linked to dominance of the institutional investors who have a longer investment horizon, resulting in low trades that contribute to low liquidity.
In 2018 the influence of the institutional investors – particularly the Botswana Public Officers Pension Fund (BPOPF) ÔÇô was heavily felt in the market as the biggest pension fund was involved in acrimonious battles with some of its asset managers. This resulted in slowdown of trades, as some mandates were changed while other equity investments were frozen due to impasse between BPOPF and its service providers.
The other explanation to the declining DCI uncovered by the BSE is low corporate earnings which could be putting off some investors. Other listed companies such as Botswana Telecommunications Corporations Limited ÔÇô which ushered in a record of local investors during its Initial Public Offering (IPO) ÔÇô blamed its poor stock performance on novice and jittery investors who were dumping the stock, acting on irrational fears.
Despite the falling index, the BSE has been resilient in its goals to grow the stock exchange while raking in citizen participation in the stock exchange. Thapelo Tsheole, appointed BSE CEO in 2015, has spearheaded some much needed fresh ideas at BSE, which spanned public outreach programmes ÔÇô covering both individual investors and targeting local companies to list on the exchange.
Just last year, the BSE which already has 34 listed companies, has attracted three listings. In addition to this, its recently introduced Serala Over the Counter (OTC) market focused on SMMEs- has attracted one listing. Since Tsheole ascended to the helm of the exchange, he has led the BSE to list about seven companies.
On January 11, during the first opening bell of the year, Tsheole showed no signs of slowing down in leading the BSE to be a robust stock exchange in Africa. In his address to the media, he unveiled plans that will ensure the BSE continues to attract citizens to grow their wealth through the stock market, while also introducing products that will attract local and international business to tap on the BSE for growth.
The BSE, which demutualized last year, is now 81.3 percent owned by the Botswana government, with remaining shares owned by the four existing stockbrokers. He said the demutualization has now allowed the stock exchange to play in the big leagues, following a well-beaten path taken by major stock exchanges.
The local bourse’s efforts are already bearing fruits – the BSE in 2018 was recognized as stock exchange by the United Kingdoms’ Her Majesty’ Revenue and Customs (HMRC), a development that bodes well for the BSE to attract investments from UK investors. The UK Income Tax makes provisions for securities traded on recognized stock exchanges, Tsheole has previously said.
At the opening bell last week, Tsheole told the media that BSE’s new listings requirements are now in effect beginning of this year. A salient point of the new listings rule has been the increase to 30 percent minimum free float that listed companies can offer to public shareholders. In another exciting reveal, the BSE intends to implement market making rules, which will help improve liquidity in the stock exchange ÔÇô a key constraint that has been cited many times as a challenge to the BSE trades.
The BSE also plans to introduce the Global Depository Receipts (GDRS) ÔÇô financial instruments typically used by companies from emerging markets and marketed to professional investors. Moreover, Tsheole says the BSE will also be revamping its technology as it implements the new clearing and settlement system, in which it will introduce Security Borrowing and Lending, IPO processing and online investor access.
Batswana will also get a feel of New York as BSE brings in large data display screens which will show tickers at two locations to display stock market information and keep the public updated. This will also be another revenue earner for BSE as it will display advertisements. In addition, an interactive website and a mobile app will also be made available, where investors can tap on new analytical capabilities that will inform their next move ÔÇô to buy or sell.