Tuesday, November 28, 2023

Equity markets slip as economic growth slows

Botswana’s equity market has not shrugged off the sluggish pace of the domestic economy, official capital markets figures released this week have shown.

A look at the past nine months of trade at the Botswana Stock Exchange (BSE) paints a picture of a market reflecting the slow pace that the local economy is undergoing.

In its quarterly report, the BSE admit that recent financial statements issued by companies that trade their shares at the local bourse suggest that the economic environment in the country has been very challenging this year compared to the other years.

“Similarly, the performance of the equity market on a year to date basis (1 January to 30 September), has reflected the slowdown in corporate earnings”, reads part of the BSE quarter three (Q3:2017) market status report.

Figures contained in the 2017 third quarter market status report compiled by the BSE shows that  on a comparative basis the Domestic Company Index (DCI) has performed better relative to the same period in 2016.

In 2017, the BSE report indicate that its DCI has depreciated by 5 percent in comparison to a depreciation of 7.6 percent recorded during the same period in 2016.

On the other hand, the Foreign Company Index (FCI) has depreciated by 0.5% on a year to date basis relative to an appreciation of 1.8% over the same period in 2016.

The performance of the domestic economy is expected to largely continue to be affected by exogenous factors such as the performance of the global economy particularly developed markets which have a bearing on the diamond industry.

The Budget Strategy Paper, a fiscal update document prepared by the government which was published recently for the financial year 2018/19 project a real gross domestic product (GDP) growth of 4.7, 5.3 percent and 5.0 percent in 2017, 2018 and 2019, respectively. The paper stated that the global economy is anticipated to gain momentum in 2017 and 2018, following a weak outturn in 2016.

According to the World Economic Outlook (WEO) update released by the International Monetary Fund in July 2017, global economic growth is projected to increase from estimated growth rate of 3.2 percent in 2016 to reach 3.5 percent and 3.6 percent in 2017 and 2018, respectively. The positive outlook is attributed to an anticipated improvement in the performance of the financial markets and a recovery in manufacturing industries.

On the other hand, in Botswana, the positive outlook is attributed to projected improvements in the sectors of Mining; Trade, Hotels & Restaurants; Transport & Communication, and Water & Electricity. The Mining sector is expected to recover in line with the positive global economic prospects, while the other sectors will continue to benefit from the implementation of the Economic Stimulus Programme adopted by Government to boost growth, and create employment opportunities.


Read this week's paper