Tuesday, April 7, 2020

Domestic counters reign the BSE over foreign counters

Domestic counters continued to be bullish as they became the most traded relative to foreign counters, having contributed hugely to the total equity turnover on the Botswana Stock Exchange in 2019.

From its 2019 full year market performance round up, domestic encounters contributed 97.8 percent to the total equity turnover on the local bourse.

On the domestic board, the Property sector was the most traded followed by the Retail & Wholesaling sector with contributions of 28 percent and 23 percent to domestic turnover respectively in 2019.

The Foreign Mining Sector remains the largest in value and most illiquid. In this sector is Anglo American Plc, which is listed on the Johannesburg Stock Exchange (JSE) and the London Stock Exchange (LSE). Anglo accounted for 93.2 percent of the foreign equity market capitalization and for 84.3 percent of the total equity market capitalization.

The turnover levels dropped by 2.8 percent in 2019 relative to 2018. Two important events held in 2019 which contributed to a reduced universe of tradeable securities; the continued suspension of Choppies Limited throughout 2019 and the delisting of Wilderness Holdings Limited and Furnmart Limited during the year. These entities have contributed significantly to trading activity in prior years owing to their size and contribution to diversity of sectors on the Exchange. “These events have also negatively impacted domestic market capitalization which has reduced by P3.7 billion to P38.7 billion from P42.4 billion in 2018. On a balance of events, to experience a continued suspension of Choppies and a delisting of two major corporates and still restore trust, confidence and investor activity has been a remarkable feat for the Exchange and the investor community,” states the BSE market report.

Prior to its delisting on July 3rd 2019 from the BSE, Wilderness was on top of the list of the most traded as it traded for the value of P282.3 million.

Second on the list is Sechaba with the value of P255.2 million. The third company with very good performance in 2019 is FPC with value of P228.3 million.

Botswana Insurance Holdings Limited (BIHL) emerged the fourth company in 2019 with the value of P178.2 million and it is followed by Letlole La Rona at P156.5 million. The local micro lender Letshego netted the value of P120.9 million. Choppies Enterprises continues to be suspended pending the compliance on its financial results release for the years 2018 and 2019.

In general, the sectors that registered a decline contributed a negative 7.3 percentage points to the Domestic Company Index’s depreciation of 4.6 percent, against a contribution of a positive 2.7 percentage points by the sectors that registered growth, being Tourism and Mining & Materials. The analysis points this negative contribution on account of the Agriculture, Energy, Security Services and Financial Services sectors.

Local institutional investors dominated trading activity in 2019 and accounted for 56.7 percent of the total equity turnover whereas foreign companies accounted for 32.1 percent of the total equity turnover in 2019. In 2019 local companies and local individuals were the net sellers of equities while foreign companies were net buyers, a sign of improved outlook into the domestic equity market relative to peer frontier markets.

Local individuals registered a significant increase from 4.5 percent to 9.9 percent between 2018 and 2019. In monetary terms, local individuals’ trades in 2019 amounted to P178.5 million compared to P83.8 million in 2018. On the back of continued outreach initiatives, the BSE closed the year with 94,354 investor accounts from 91,311 investors in the prior year. This improvement demonstrates increased awareness of the stock market by Batswana which is essential for promoting citizen economic empowerment and a heterogeneous investor base.

Currently, the ongoing BSE strategy for the period 2017-2021 is expected to grow the ratio of the BSE’s market capitalisation to GDP from 34 percent to 40 percent by 2021 as well as increase the number of domestic companies listed from 24 to 30 in the same period.

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