Experts project bearish outlook for BSE
Isaac Pinielo | Friday June 9, 2017 16:12
The experts are of the view that the spell of tight liquidity that has beleaguered the Botswana Stock Exchange (BSE) since the beginning of 2017 is not likely to ease any time soon.
Motswedi Securities head of research, Garry Juma said they expect the trend to continue for the better part of this year due to the prevailing mismatch between supply and demand in the market.
The stock market, as measured by the Domestic Companies Index (DCI), has lost O.78% since the beginning of the year.
“Some of the stocks are in demand but there are no sellers in the market, while some that are being offered have no buyers,” he said.
He noted that most of the trading so far this year has been in selected stocks such as Sechaba Breweries Holdings, Choppies Enterprise and Letshego Holdings Limited.
He said this year only, P800 million worth of shares have exchanged hands on the BSE.
Between January and May 2015, around P1.2 billion worth of shares were traded.
This reduced marginally to around P1 billion during the same period in 2016.
According to Juma, this is largely due to the fact that most of the stocks are perceived to be expensive by investors.
Juma also mentioned the improvement in developed economies that has seen movements of funds from risky assets in emerging markets as one of the factors that have caused a decline in activity especially from the large foreign investors.
In addition, he said the increase in US interest rates has also seen the movement of money from emerging markets to the US that is perceived to be less risky and has better yields.
However, in a recent weekly financial markets review, the brokerage firm said there was a small relief that came last Friday after PrimeTime Property Holdings, Choppies and Botswana Insurance Holdings Limited traded P10.7 million worth of shares between them.
Market development manager at the BSE, Thapelo Moribame acknowledged that there has been a general decline in liquidity across global markets.
“Bringing it home, the slowdown in liquidity is there in the current period compared to the same period last year,” she said.
As such, she said the BSE has ramped up its market development initiatives to bring more investors and issuers to the market.
Moribame noted that it is difficult to give a time frame because the impact from the market development initiatives will be realised in the medium to long-term.
She said one of the ways that will address the low levels of liquidity is the introduction of market making.
She explained that market making is primarily meant to enhance liquidity across the bourse by introducing intermediaries known as market makers who stand ready to transact with any counter party on the buy or sell side.
“Since market makers will hold the inventory of the stock, this initiative is anticipated to promote the ease of transacting in several designated securities and improve liquidity in general,” she said.