Sunday, September 20, 2020

Investors cautious on financial sector performance

The Botswana Stock Exchange (BSE) was in a sluggish mood Monday as investors remained cautious of the blue chip companies that are lined for profit parade for the half and full year results to the end of December.

The banking sector, which accounts for well over 70 percent of the  P 28 billion  market capitalization, are expected to publish  financial  results starting from March.

The┬ácountry’s┬ábiggest commercial bank and the leading company on BSE, Barclays Bank of Botswana, its peers, Standard Chartered Bank of Botswana, and ABC Holdings are to publish end of the year results.

On Monday, BSE saw some activities, largely on the big companies counter that were led by Barclays, Botswana Insurance Holdings Limited (BIHL), G4S, Letshego Holdings, Sefalana, Sefcash and Turnstar traded on the day but were all retail activities.

The move was a follow up to the Friday close where the financial sectors saw some increased activities but short on share price increase.

“Part of the reason why there is no significant increase in the share prices is that the market has been in short of any (good) economic news,” an analyst at Motswedi Securities, Garry Juma, said on Monday.

However, the current investors’ move is a bit tricky as it is still in the early days of the year and the blue chip companies ÔÇô mainly in the financial sectorÔÇöare not expected to release their results until March this year.

The Domestic Company Index (DCI) stood at  7128.51 points  on Monday against 7130.13 points  at Friday close.

The last week  trade was buoyed ABCH, Barclays, BIHL, FSG,G4S, Stanchart, FNBB and RDCP leading analysts to conclude that investors were taking positions ahead of the release of  2009 financial results from most stocks.

But one thing is clear, the banking sector tightened cash disbursement and upped its bad debt provisions in the past year as it anticipated an upward spiral in default delinquencies at the height of the global economic crunch.

Mines employees were the first ones to be blacklisted by the banks in terms of loan advances as the sector tried to minimize the impact of the global economic crisis from eating on their balance sheets.

“We have seen an increase in impairments in the last year though it was still manageable. The expected bad debt provisions are the likely reason why we are not seeing a big movement in share prices,” Juma said.

However, the banking sector has largely remained solid and profitable in the country with all but one listed commercial bank declaring huge dividends last year after heavy profits despite the fact that, globally, most of the businesses were negatively affected by the recession.

“We are not expecting a significant change regarding the banks’ profitability because none of the commercial banks closed as a result of the global economic crunch,” he added.

But the next set of ┬áresults are expected to give a clear indication of the economy going forward as positive news might “ signal” ┬áthat the economy is out of the woods.

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Sunday Standard September 20 – 26

Digital copy of Sunday Standard issue of September 20 - 26, 2020.