Wednesday, October 21, 2020

Local companies outshine foreign ones at BSEL

Volatility and panic have engulfed major financial markets across the world with many experiencing significant drawdowns from their 2020 highs.

This has effectively wiped out previous year’s gains due to the sell-off caused by the economic uncertainty on the back of the Covid-19 pandemic.

In the broader economy and the financial system, the Botswana Stock Exchange (BSE) performs a crucial function of facilitating the formation, allocation and mobility of capital.

During the period from January to May 2020, local companies continued to be the dominant market participants in the local bourse contributing over 60 percent to equity turnover.  

A glean at the latest local bourse market performance report for the duration of January to May 2020 shows that local companies contributed 63 percent to the turnover, followed by foreign companies at 28 percent.  

Local retail investors injected seven percent, while Foreign retail investors contributed two percent while Brokers only contributed less than 1 percent.

“26 out of 32 companies traded so far in 2020 generating equity turnover of P273.9 Million. The top 5 most traded companies were FNBB (P48.8 Million), Letshego (P47.1 Million), Sechaba (P43.5 Million), BIHL (P27.1 Million) and NAP (P14.3 Million). Turnover for the top three most traded companies accounted for 56 percent of total equity turnover,” depicts the market report.

During the year to 31 May 2020, out of the 32 listed companies 19 have had price changes. The top five companies that experienced share price increases were the micro lender Letshego by 15.4 percent, Botswana Diamonds by 8.3 percent, Letlole la Rona by 4.4 percent, Cresta by 0.7 percent and Sefalana by 0.6 percent.

The bottom five companies that experienced share price decreases are Lucara which is known for discovering exceptional stones at – 49.7 percent, followed by Minergy with – 22.7 percent, Stanchart at – 17.4 percent, SeedCo. at -13.0 percent and BTCL: -12.2 percent.Despite the Covid-19 storm which has paralyzed bigger markets globally, here at BSE turnover levels were the highest during the month of March 2020 reaching P117.7 Million in equity turnover from P30.2million in the previous month of February. Sadly after recording its highest in March, the turnover then crawled down to a collection of P54.1million in April and P34.1million last month (May). Over the period from January to May 2020, total equity turnover amounted to P273.9 Million resulting in an average daily turnover of P2.7 Million.

Meanwhile, at the centre of the Covid-19 pandemic, the International Monetary Fund (IMF) indicates that the global economy has already entered a recession that could be as bad or worse than the slump after the 2008 financial crisis. The World Bank estimates that the coronavirus outbreak could cause significant economic slowdown in China with spill-overs into other parts of the world.

In addition, the World Bank has projected that Sub-Saharan Africa will see its first recession in 25 years because of the severe impact of the coronavirus pandemic. On the back of these projections, the performance and competitiveness of companies across most industries could be substantially negatively affected.

The man at the helm of the BSE, Thapelo Tsheole suggests that, “central to recovery in the post-pandemic era, and perhaps during the pandemic, is the need to maintain solvency and to access capital when it is needed.” 

In addition to available fiscal interventions and relief measures offered by alternative suppliers of capital, he said, businesses need to be made aware of the various methods they could deploy to tap into the deeper pools of contractual savings in the country through the various instruments on the BSE.

“These methods are diverse in nature and applicable to both listed entities and entities willing to list. They serve various strategic purposes over and above raising capital and can be very important in catalyzing the pace of recovery for individual businesses post the COVID-19 pandemic.”

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