While the bulls came charging in the second half of the year, one local brokerage firm said it will remain cautious as it wants to see if pressures that led to share prices rising will be maintained in the year.
Stockbrokers Botswana (SBB) said on Friday it will observe the coming reporting period and use it as a yard stick to determine whether the macro environment is supportive of the trading environment.
The bulls came charging in second quarter of the yearÔÇöa move that led the DCI to break through the 10,000 points mark, closing at a record high of 10,690.08 points, up 10.3 percent quarter-on-quarter.
SBB said on its Fund Manager’s Companion for QII: 2015 that stocks rallied with strong bullish sentiment on the back of sound earnings while large scale portfolio rebalancing following the shuffle of the various mandates to manage Botswana Public Officers Pension Funds (BPOPF) resulted in an increase in demand and heightened activity in the market.
The stock broker added that trading activity came in considerably higher, with turnover up 44.4 percent to P875 million on 219 million shares, from P557 million on 152 million shares the previous quarter.
“The rally for the quarter was however largely driven by bullish sentiment geared towards a proposed share buy-back by Letshego, following approval by shareholders to buy back a maximum 10% of the shares in issue,” said the brokerage firm.
“The bulls seem to be in full control. However, going forward, our view is mixed between economic fundamentals being supportive of the equity market and the cautious view that the same pressures that pushed up stock prices in the second quarter could see a cooling off in H2:2015.”
Stockbrokers Botswana also added that accommodative monetary policy which has adversely affected bank profitability continues to seem the more likely theme in the near term.
“Like a double-edged sword, while putting a squeeze on margins, this has also dis-incentivised savings in the country. The current economic landscape could lead to investment flows trickling out of the country, as we are faced with a dearth of savings products in Botswana,” it said.
“We are specifically eyeing reporting season in Q3 as an indicator of whether macro developments have supported earnings growth, and if stable inflation and falling rates that have eased the burden on consumers’ pockets will provide impetus for growth going forward.”
Already, Standard Chartered Bank Botswana one of the country’s top 5 banks said its half year results for the period ended 30th June 2015 will be significantly lower. The bank blamed the “the challenging trade environment which has slowed down lending and tightened margins”.