BSE plummets to 'worst performance in history'

MBONGENI MGUNI
Staff Writer | Friday December 10, 2010 00:00

Market analysts say before this, the BSE's worst performance in a single day had been October 31, 1997 when it lost 4.28 percent.  The financial counters, whose massive market capitalisation anchors the BSE, drove the local bourse down as desperate investors sold stock ahead of the festive season.

First National Bank Botswana, Barclays and Standard Chartered all lost significant ground on Wednesday as shareholders converted their holdings into holiday cash. Another lower capitalised financial counter, Blue, was among the losers, while blue chip Letshego was unchanged.

Standard Chartered shed 6.1 percent, FNBB 4.7 percent and Barclays 3.6 percent with the Domestic Companies Index shedding 326.05 points to close at its lowest levels since August 2009.

ABCH was the only counter on the DCI to gain yesterday, climbing 37thebe to close at P2.42 at close of trade.

Brokers explained that while shocking, the BSE's movements were expected at this time of year. 'It's a cyclical pattern and it's expected,' said one. 'Most share prices will push down even if the fundamentals are encouraging.

'The cause is profit taking as many people are trying to raise funds for the festive season and investors are not too worried about the prevailing share prices because they know this is cyclical.'

'The more sellers are on the market, the more prices will decline. While fundamentals for the stock may look positive, people are paying attention to the need at hand.' Wednesday's performance continues a general losing streak for financial stocks which collectively lost an average of 4.25 percent last week off festive-season selling.

Brokers said in general, the BSE had been in decline despite the August/September reporting period, a season usually associated with price climbs.

'The reporting season was not impressive,' another broker said. 'Expectations tend to be high if a company is to make an announcement, but this time around, we did not see outstanding performances. 'They were mostly break-even performances and even some losses. As a result, the market has been trading weaker and part of this week's drop has been fuelled by that.'

Analysts expect the slide to continue as the market heads towards the festive season and room exists for more shedding in counters outside the top tier. Within the top tier, analysts are recommending 'buy' looking at the lower prices the counters are trading at.

'If you have a long-term outlook, this is the time to grab shares as the underlying value will return them to proper valuations in the New Year,' an analyst said.

'Investors can take advantage of the market's weakness and take long-term positions. There's room for further slides as there is price hang on most stocks.' The slide on the BSE's main index is the direct opposite of activities on the foreign bourse where mineral resource counters are driving northward week-on-week. Investors in mineral counters generally take long-term positions, particularly as most of the companies listed on the BSE are in exploration rather than production.