Wednesday, April 24, 2024

Govt bonds active as liquidity perks up in first quarter

The Botswana Stock Exchange (BSE) said the first quarter of the year was the best for the bourse’s bond market as liquidity in the government bonds improved significantly.

According to the BSE’s market performance report as at 10 April 2015, this is the highest amount ever recorded over a similar period since the inception of the domestic exchange.

During the period January 1 to April 10, 2015, liquidity in government bonds stood at P643.1 million compared to P88.3 million in the same period in 2014. There was no liquidity movement on the corporate bonds.

Still in the same period, the market capitalisation of government bonds stood at P6.8 billion, which was better than P6.2 billion in the same quarter in 2014. The market capitalisation was flat on corporate bonds at P3.4 billion compared to P3.3 billion in the same period in 2014.
The total market capitalisation of listed bonds rose to P10.2 billion compared to P9.3 billion in the same period last year.

“The year 2015 is undoubtedly a remarkable year in respect of liquidity in the bond market. On the basis of turnover recorded as at 10 April 2015, this is the highest amount ever recorded over a similar period since the inception of the BSE,” Deputy CEO of the BSE Thapelo Tsheole said.

“In fact, this amount of turnover is the highest ever recorded in any given calendar year. The trades were solely on account of Government bonds whilst there was no liquidity on corporate bonds. Further, a significant portion of the trades (96.6%) were generated by the BW003,” he added.

He said the BSE analysis further indicates that the trades were skewed with customers primarily selling the bonds to banks or primary dealers (79.8%) and the balance of the trades were between customers themselves.

Tsheole however said whilst it is commendable that activity on the bond market has reached record levels, it is not ideal that a balance has not been achieved as the trades were dominated by a single bond and all of them being on account of Government bonds.

He revealed that the corporate sector of the bond market has been absolutely illiquid since 2013 although there have been an increasing number of listed corporate bonds since 2013.

He said the initiative to review the BSE debt listing requirements is anticipated to provide further insight to issuers as to the methods through which bonds can be brought to the market. “Historically, and even at present, corporate bonds are being issued through private placement with the target market being institutional investors most of whom hold the bonds until maturity,” Tsheole said.

“The BSE will endeavour to promote other issuance methods such as public offer where the issuance is open to retail investors. Such a method can go a long way in achieving heterogeneity in the market, in the process promoting access to bonds by investors with varying investment horizons.”


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