The Domestic Company Index (DCI) was sluggish by Monday afternoon as investors were weighing their options ahead of a full reporting period.
The biggest bank on the Botswana Stock┬áExchange┬áand the most innovative bank, the First National Bank of Botswana (FNBB), blazed the trail on Friday by announcing its unaudited results while Botswana Insurance Holdings Limited (BIHL) issued a profit warning ahead of┬á the release of the results.
BIHL warned markets to expect a battered balance-sheet because of the tough trading conditions and the non recurring of a windfall from its sale of part of its Zambian operations last year.
The move prompted investors┬á to look for an early exit as the stock┬á traded 122,932 shares on Monday valued at┬á 1, 284, 639.40 thebe.
Other financial institutions (ABC Holdings, Barclays Bank of Botswana and StanChart) are awaiting a green light┬á from┬á the regulator, Bank of Botswana, before they can┬á parade their results.
The sector, which controls 46.6 percent of the DCI is expected to┬á announce┬á subdued earnings.
On┬á Monday,┬á 195, 685 shares were traded valued at┬á 1,485, 653.84 thebe lifting up the┬á DIC slightly┬á to 7833.96 points against┬á 7829.49 points at Friday close.
The country’s biggest┬á hotel group by footprint,┬á Cresta,┬á traded┬á 18,270 shares on the day┬á at 91 thebe per share reflecting negative sentiments towards the stock.
The tourism sector has been hit hard by the global economic crisisÔÇöespecially the European debt crisis–┬á and has seen share prices in the sector shrinking.┬á┬á
“The market is geared up for the reporting period┬á but at the moment most of the investors┬á prefer to stay on the sidelines,” Garry Juma, an analysts at a brokerage firm, Motswedi Securities, said on Monday.
He said at the moment “the┬á outlook for the DCI is hazy” given the state of the economy.
However,┬áAlphonse Ndzinge, the Chief Investment Officer at Afena Capital ÔÇö a Batswana-led fund management companyÔÇösaid┬áthat DCI started the year on a better note but┬á the outlook for the year remains challenging.
“The local market has had a relatively good start to 2013, up over 4 percent. The retail sector and the large cap financials have been the main drivers of the rally with positive earnings results so far supporting this strength,” he said.
“Looking ahead, it’s very difficult to have a crystal ball in the short-term. But looking at the general market valuation, which is a key determinant for assessing the short-term equity market outlook; right now on aggregate the market does not look particularly expensive, well at least on a market cap weighted basis,” he added.
Ndzinge said┬áthat the┬á DCI is trading below 11x historic earnings, with corporate earnings growth expectations relatively encouraging across the board.
He added: “ Evidently, there are a few exceptions with some companies likely to show depressed earnings and trading on expensive multiples. So investors will have to be generally more selective, balancing individual stock potential with risks to earnings.
These risks particularly relate to macroeconomic shocks. For now market sentiment suggests that the economic backdrop is broadly positive.”