Wednesday, October 21, 2020

Listed companies shed value

The Botswana Stock Exchange is closing another quarter of the year on the red, with most of the local equities shedding share value at a time most companies are holding back on dividends to build up buffers during an economic downturn fuelled by the pandemic.

The Domestic Company Index (DCI),  which tracks share price performance of the 24 listed companies on the domestic counter, opened the third quarter of the year at 7159.66 points, and between July to September, the DCI retreated to 7000, reflecting a 2.22 percent drop.

This is on the back of another 4.1 percent decline in the second quarter, which had widened from the 1.54 percent in in the first quarter of the year. In the year to date, the DCI is down by 6.54 percent.

Since 2016, the DCI  has been on a downward trend, falling by 11.3 percent in 2016, before recovering slightly in 2017 with a 5.8 percent loss but stumbled in the last two years, with average losses a bit over 11 percent. However, last year the DCI narrowed losses to 4.6 percent.

Of the 24 domestic companies listed on the bourse, only two companies are on the green, with the retailer Sefalana share price up by 3.68 percent and property investor Letlole up by 1.78 percent.

The biggest losers include blue chip companies like First National Bank Botswana (FNBB), down by 17.54 percent, Botswana Telecommunications Corporation Limited (BTCL) which has shed 17.89 percent, Standard Chartered Bank Botswana is down 14.97 percent, the tourism outfit Chobe Holdings has lost 14.41 percent, Choppies share value retreated by 13 percent, and property listed Turnstar Holdings slid by 11 percent.

Meanwhile, as corporate profits continue to trickle in, most companies are reporting falling profits in some instance, losses, weighed down by the impact of Covid-19 containment measures, which included nationwide lockdowns that affected business activities. In response, corporates have decided not to declare dividends, which is portion of profits paid to shareholders.  Dividends are an important part of shareholder returns, especially when share prices are low.

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