Botswana Stock Exchange, (BSE), is expected to be lifted up by the financial sector as executives roll-up their sleeves for their reporting period that starts next month.
Analysts said the BSE’s bell-weather recent performance is expected to give signals on the direction of the economy, which is being supported by high international diamond prices. This comes at a time when the Domestic Company Index closed the week on Friday by edging to 5.99 percent year-to-date to 6796.91 points.
This is against the collapse of the market last year when BSE closed the year at ÔÇô 15 percent.
“There are two reasons why the financial sector is expected to give us the direction of the economy. First, we have to understand that financial sector’s market capitalization represents over 60 percent of the BSE.
“And, secondly the recent diamond sales have been impressive and the financial sector reporting might give us an indication that the worst is over,” Leutwetse Tumelo, of Capital Asset Management, said.
The four listed commercial banks: ABC Holdings, Barclays Bank of Botswana and Standard Chartered Bank of Botswana will report for the full year to end of December while First National Bank of Botswana will do audited results to end of December.
Letshego Holdings is also in a close period while Botswana Insurance Holdings Limited is also poised to parade its better than expected results.
BIHL has since issued a warning, indicating that its results will be in double digits.
The move comes at a time when the country is emerging from the worst recession since World War II that prompted financial sector to take a cautious move in their lending.
The impending results are expected to be in line with some international developments, especially the United States of America where confidence is building up with the unemployment having dropped from 9.8 percent to 9.4 percent.
Further, the USA is enjoying support from investors than Europe, according to Sovereign Wealth Funds’ Consensus Demand Meter for the first quarter of 2011.
Six out of 10 investors favour USA equities while two out of 10 are prepared to buy European equities.
Further, four out of 10 are prepared to buy European bonds.
“We are expecting a modest increase in the loan books of the commercial banks,” a researcher at Motswedi Securities, Garry Juma, said.
“We are expecting some profitability, which is supported by the mining sectors,” he added.
Outside the loan books, the banks are expected to continue to benefit from the Bank of Botswana Certificate (Bobcs) given the limited scope of the short dated financial instruments like treasury bills.
“I think the Bobcs will continue to have a big impact on the banks bottom lines because of the huge interest rates that it pays,” Tumelo added.
Bobcs are secure and short dates financial instruments, which were initially aimed at containing excess liquidity in the market. But they are now the most preferred investment vehicle for the commercial banksÔÇösince it is open to their club.
Letshego is also expected to do well because of its deduction system that is targeted at source. So far, the company is one of Botswana’s best exports outside the mineral sector. The company, which is the third biggest on the BSE, operates in Botswana, Mozambique, Namibia, Swaziland, Tanzania, Uganda and Zambia and has expansion plans to get into Ghana as a springboard into the West African region.