The Botswana Stock Exchange (BSE) is not only boosting liquidity by offering local investors the chance to invest in the Johannesburg Stock Exchange’s top 40 companies ÔÇô it is hoping to educate investors about exchange-traded funds (ETFs) so it can structure similar products in future.
According to Thapelo Tsheole, product development manager of the BSE, “The main intention of the BSE is to add to the variety of financial instruments in the BSE to give local investors an opportunity to invest in these instruments and diversify their portfolios. We also want local investors and foreign investors to own this market through the BSE.”
There is no doubt that foreign liquidity will also boost the BSE, whose liquidity is low compared to other markets, as local investors tend to hold on to their shares for a long time.
“There are too few listed entities,” says Tsheole. “Listing Satrix 40 and Absa Capital’s NewGold is an initial step in creating ETFs based on local shares when liquidity improves. We are definitely looking at more such products going forward.”
Market capitalisation on the BSE is fairly high ÔÇô $4,5bn ÔÇô but increased liquidity would definitely benefit the 20-year-old Bourse. BSE’s trading system is also being upgraded to appeal to foreign investors and is expected to be fully automated in 2010, when Satrix and NewGold list.