Local fund managers implored investors to remain calm in the midst of the global downturn while at the same time urging government to issue long dated bonds to deepen the capital markets with the view of financing some of the big projects which government is planning to undertake.
Botswana government is currently pondering on plans to finance the Botswana-Namibia rail-line, the development of the Walvis Bay, construction of Kazungula Bridge and the country’s second university.
Speaking to The Sunday Standard in an exclusive interview, the Chief Executive Officer of the Botswana Insurance Fund, Victor Senye, said the government should consider issuing long dated bonds in a bid to fund those projects.
The move will hedge against the exchange rates swings and, at the same time, ensure that local funds managers to support the country’s development.
Bifm is the country’s largest fund management and the best diversified in terms of assets and have been affected by the international financial crisis like any other company in the world. However, local fund managers have been cushioned by the deprecation of the Pula against the USA dollar that will sweeten their reportings at the end of the year.
“We are affected like any other player in the market, however, the depreciation of the Pula against the dollar has helped us. But, the depreciation of the Pula does not mean that you have any flair of business,” he said.
He added: “ It has now become difficult for one to predict what will happen to the markets ( developed market) in the next month or so because there is lack of trust and finance between the market players.”
The global financial crisis was triggered by sub-prime housing loans in the United States of America and was followed by the collapse of investment banks and insurance companies.
The crisis suddenly spread across the developed markets with people running on the banks to cash their money and dumping the stocks but governments responded very late by pumping in trillions of US dollars to try to stabilize the system.
As part of the plan to guard against the developed markets turmoil, Bifm is scouting for opportunities across the African continent in countries like Namibia, Kenya, Uganda, Nigeria and Zambia.
“We have to diversify our portfolio as much as we can in terms of currencies, sectors and geographical spread,” he said, adding that they have created Africa Emerging Market Fund which is investing on companies all over the continent from Cape ÔÇôto- Cairo.
Africa has been the darling of international investors after it showed some political stability and readiness for embracing corporate governance.
“Amid the global financial crisis that has rocked the world and left some investors with huge losses, Stanbic Investments recommends investors must remain calm,” the company said this week.
Stanbic said it believes that in order for investors in equity markets to mitigate losses, they must have a long term investment horizon, a well diversified portfolio and should stick to their investment objectives.
“The first three quarters of the year have been characterised by an extraordinary mixture of challenges in the global markets that included high commodity prices, the US mortgage market crisis, slowing growth, and most recently the turmoil in financial markets has caused shocks to the world economic system that will undeniably have far-reaching consequences for global capital markets and economic growth”, Stanbic’s Chief Investment Officer, Baboni Mogasha, said .
He said Botswana capital market has not been directly affected by the global turmoil, but that the effects of high commodity prices have been felt through higher fuel and food prices, and a more restrictive monetary stance.
The local equity market has been reacting mostly to local economic factors and there has been no correlation to other markets. The end of the second quarter marked the conclusion of the bear market that had been experienced since the fourth quarter of 2007. The equity market had experienced a protracted period of negative performance, losing almost 30% as local stocks went through a market correction which was exacerbated by a fraud case that affected the banking sector at the beginning of the year. However, the market has rebounded from the since the beginning of the second half of the year.
“Government’s commitment to promoting economic growth as well as growing private sector participation especially in the mining industry continue to contribute positively towards employment creation and consumer spending, which drive corporate profitability,” Mogasha said.
To date, the Domestic Companies Index has managed to reverse the year’s losses, and is currently trading up 2%. This growth has been driven primarily by the large cap stocks, with the three commercial banks releasing stellar results during the third quarter.
Mogasha added that the Botswana economy will, however, not escape unscathed from the financial crisis. Its’ sizeable pension funds and foreign exchange reserves have offshore investments in global markets, and are likely to suffer some losses. These savings vehicles are however long-term investments which will also be cushioned slightly by diversification benefits.
Stanbic Investments Botswana is the local subsidiary of STANLIB, one of South Africa’s largest unit trust company. The subsidiary has more than tripled the size of its business in the last three years and now has more P4.2 billion in assets under management.