Local individual investors’ participation on the Botswana Stock Exchange (BSE) surged to 10.6 percent in 2012 from 5.9 percent in the previous year on the back of increased development activities.
In an interview with The Telegraph, BSE Product Development Manager Thapelo Tsheole said local investors maintained their dominant contribution to turnover over the years. In 2010, local institutional investors accounted for 49.2 percent of turnover in the bourse although it dipped to 44.7 percent in 2011 on account of increased foreign interest in the local market. This compares favourably against Nigeria and South Africa at five and eight percent respectively.
The contribution however picked to 45.7 percent in 2012, buoyed by increasing domestic demand. There was a decrease of 7.2 percent in foreign companies’ contribution to turnover during the year, while foreign individual participation remained constant.
On a quarterly basis, local companies dominated turnover in the first of 2012 while foreign companies traded most in the second half of the year.
Tsheole explained that consistency in retail investor participation is desirable because it reflects the interest of the local investors in the local bourse’ stock (shares) market.
In the fourth quarter of 2012, local individuals’ contribution to turnover increased by 2.1 percentage points in line with the annual percentage contribution of 10.6 percent.
Tsheole added that Automated Trading Settlement (ATS) will help BSE and make the market readily accessible to both retail and individual investors. Introduction of internet based trading is also expected to improve connectivity with both domestic and foreign investors.
On what the BSE was doing to attract more individual investors in the local stock market, he said they continued to pursue their development initiatives with the objective of increasing awareness of prospective investors about the stock market.
The initiatives included presentations to various organisations around the country such as schools, government ministries and departments as well as local authorities. The initiatives also included publications and radio presentations.
A stock market analyst who preferred anonymity said in Botswana, the individual investors in the share market is not quickly growing because Batswana still believe that the best investment is in the cattle and small stock industries.
“A lot of public education needs to be put in this area. There are a lot of people who have money but are investing in mostly cattle because they do not understand the benefits associated with investing in the stock market. This is one area that needs intensive training”, said the analyst.
He further explained that the problem with investing in the stock market is that if the companies invested in performed badly, it will affect the share prices and scare away potential investors.
“In Botswana, the situation is different because the listed companies have not been badly performing”, he added.
The Domestic Companies Index (DCI) closed the year 2012 at 7,510.25 points, an increase of 7.7 percent compared to a growth of 8.7 percent in 2011. This was the first time that in the past five years the DCI has registered a positive growth for two consecutive years and thus signaling a possible recovery to the effects of the global financial crisis of 2008/09.
The appreciation in the DCI in 2012 can be attributed to the growth in the index throughout the four quarters in 2012. The BSE DCI increased by 6.7 percent from 2008 to 2012.