The performance of the Domestic Company Index (DCI) has declined in 2018 on the back of a similarly challenging environment that is characterised by sluggish corporate earnings.
Motswedi Securities Researchers, Salome Mokgatlhe and Garry Juma have worried that, at this rate “the DCI is likely to close the year in the red once again unless valuations changes.”
As indicated by the market performance report for the period of June from Botswana Stock Exchange, recently the DCI has depreciated by 5.2 percent in 2018 in comparison to a depreciation of 2.2 percent during the same period in 2017, whilst the Foreign Company Index (FCI) has depreciated by 0.2 percent on a year to date basis in both 2017 and 2018.
Stanlib Botswana Chief Investment Officer, Tshepo Lemo also last week indicated at the Stanlib investment forum that DCI continued to decline locally with exception on hotels and restaurants. Looking at the global outlook markets turned positive in the second quarter of 2018, as offshore investments in the developed markets were positive supported by good economic outlook.
The US outperformed, whilst in the emerging markets the dollar depreciation remained a challenge. “There is still scope in the US, and with the emerging markets we are expecting the dollar performance to cool off and the markets will start performing as well,” said Lemo who is optimistic about the earnings at the back of tax reforms going forward. However, for the US, 2019 is anticipated to have some slowdown in earnings per share.
Closing the week on Friday last week, the DCI lost further ground during the week under review, losing 0.56 percent to extend its year-to-date losses to 6 percent.
Barclays, Choppies and Letshego were the most liquid counters during the week under review after the market traded 6.0mn shares worth P20.3mn with Barclays trading P12.1mn worth of shares, followed by Choppies P4.8mn and Letshego P2.5mn. All the 3 stocks are currently on closed period pending the release of their financial results. According to the BSE requirements, they have up to the 30th of September 2018 to publish their financials. Choppies will be releasing its full year financials for the year ended 30 June 2018 while Barclays and Letshego will be publishing their interims.
The Motswedi Securities researchers said, “we do not expect much surprises from the companies given the challenging environment. It will interesting to see how Choppies and Letshego performed in other markets outside Botswana.”
Closing the year 2017, several blue chip counters shed a lot of value over the year with the delivery of either flat or dismal earnings. The correction of these counters outweighed the year’s gainers, resulting in the DCI’s negative performance.