The banking sector share prices have gone through the roof powered by better than expected market confidence that prevailed during the first quarter of the year, financial analysts revealed last week.
“We believe that the local stocks are not cheap anymore, but we are not selling,” Chief Investment Officer at Bifm, Thomas Labuschagne, told┬áa trustees seminar on Wednesday.
He said the banking sector share prices have gone up but was quick to say he did not expect any dramatic market correction in the near future.
His comments┬á were shared by Stockbrokers Botswana’s┬á Fund Manager’s Companion which said the locally listed┬á stocks have beaten all expectations. The market is also boosted by the retail clientsÔÇöwithin the┬á middle class bracket ÔÇö┬á who are now pulling out of insurance plans into equities, taking advantage of the buoyant market.
“With the continued rally of the equities market surpassing all expectations, valuation of some counters on the Domestic Board, especially the large caps, may have gotten too high. This is especially true for the banking sector where the stocks do not appear to be tracking the fundamentals, although the fundamentals underpinning┬á the sector remain strong,” Stockbrokers Botswana said.
The banking sector, led by Barclays Botswana, shot-up beyond the reach of ordinary Batswana to P40.00 per share which resulted in a share split of┬á five-to-one┬á at the beginning of the year. However, the giant rose to P9.75 within a short time before retreating to P9.00 by Wednesday.
FNBB picked up in a dramatic pace after its half year results to end the week at P26.10 per share while Standard Chartered Bank of Botswana reached P 21.35 by Thursday. The banking sectorÔÇöincluding other financial services ÔÇö-comprises of over 80 percent of the Domestic Board capitalization.
Stcokbrokers Botswana┬á further pointed out that even though┬á valuations have┬á gone up there are still some reasonably priced stocks in the market.
On inflation, it said┬á it is expected to moderate┬á to the Bank of Botswana’s┬á annual inflation target of┬á four-toÔÇôseven percent, albeit in the short term. The latest inflation figures show that it has slipped to 6.3 percent.
“On the longer horizon, we are cautiously optimistic that the domestic economic conditions will improve solidly by the end of the year anchored by strong infrastructure spending and easing┬á inflationary pressures.” The DCI is set for another solid year.
It added that the moderating inflation is likely to embolden a number of institutions to┬á float some bonds in a bid to┬á support their cash requirements.
“Going forward, prospects of lower yield with the decline in inflation expectation should stimulate the long term debt market. The domestic yield┬á curve remains inverted with yields across maturities continuing to decline in line with expectations for decreasing short term inflation,” the report added.