Wednesday, November 29, 2023

BSE diversifies bonds market

The Botswana Stock Exchange (BSE) launched the three bond indices on Thursday marking the diversification of its activities into bonds thereby playing an active role in the development of a vibrant capital market.

The launch of the indices pushes BSE on the top three countries in Africa with bond indices after Kenya and South Africa.

Kenya has one bond index which is being calculated by FTSE.

The three bond indices are: Government Bond Index (GovI), the Corporate Bond Index (CorpI) and the composite or the Botswana Bond Index (BBI).

The BSE’s trail-blazing head of Product Development, Thapelo Tsheole, charged with the development of the indices, said the establishment of the Bond Market Association some two years ago was aimed at having a robust bond market.

Tsheole, who is also credited for bringing in the Exchange Traded Funds (ETF) to the local market and currently is burning mid-night oil in an attempt to build a strategy that will make the BSE Africa’s leading mining exchange.

He said the Bond Market Association informed BSE to do three key things, such as, the development of the bond indices, use of ATS to trade bonds and the use of CSD in a bid to develop the bond market.

“BSE computes eight indices for equity using different return and weighting methodologies. BSE is predominantly an equity exchange even though we do list and trade bonds,” said Tsheole.

He noted that the bond indices are important to motivate and sustain the development of the bond market, and added that a bond index provides a benchmark for portfolio managers to determine portfolio returns relative to the movement in the index.

“It would also form the basis for developing bond index funds and other bond related products. The bond index could also be used by investors to judge and objectively choose between investing in alternative debt funds,” he said.

BSE is expected to embark on a regular quarterly review of the constituent bonds in the indices which will take place during the last month of each quarter.

He stated that the meetings to review the constituent bonds in the indices will be held during March, June, September and December of each year.

“Any inclusion or exclusion of bonds to and from the indices and constituent and weight changes will be implemented with effect from the first trading day of the month following the review meeting,” Tsheole said.

For his part, BSE Chief Executive officer Hiran Mendis said the BSE indices is also aimed at positioning the exchange to deal with inflation-linked sovereign bonds should they be listed.
Presently the BSE is handling the fixed rate bonds.


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