The subdued performance of the Botswana Stock Exchange (BSE) is a reflection of a slowdown in companies’ earnings and a sluggish economy in general, the bourse said in a market update report.
The performance of the BSE, as measured by the benchmark Domestic Companies Index (DCI) has lost five percent in the first nine-months of the year.
In a third quarter (Q3) market update, the BSE says that despite an impressive 4.2% economic growth forecast for 2017, the sentiment on the ground is different with companies and perception surveys pointing to a subdued growth.
Annual reports published by listed companies have suggested that the economic environment in Botswana has been very challenging this year compared to the other years.
The sentiment is also reflected in the Bank of Botswana’s Business Expectations survey (March 2017) in which local businesses projected a subdued economic growth of 1.9% in 2017, despite the 4.2% growth anticipated in the 2017 Budget Speech.
“On their part, companies cited the reduced level of spending as a major contributor to the difficult business environment.
“Similarly, the performance of the equity market on a year to date basis (1 January to 30 September) has reflected the slowdown in corporate earnings although on a comparative basis the Domestic Company Index (DCI) has performed better relative to the same period in 2016.
In 2017, the DCI has depreciated by 5.0% in comparison to a depreciation of 7.6% during the same period in 2016,” reads the report.
The Foreign Company Index (FCI) has depreciated by 0.5% on a year to date basis relative to an appreciation of 1.8% over the same period in 2016.
In terms of turnover, trading activity on the bourse has been in line with levels recorded in 2016 over a similar period. However, there was a slight increase in 2017 with turnover amounting to P2. 14 billion compared to P2.13 billion. On average, trading activity amounted to P11.5 million a day in both periods in 2017 and 2017.
In the period, there was a slight increase in participation by individuals on the market when compared to institutional investors.
The contribution to turnover by local individuals increased to 4.5% from 4.2% in the third quarter of 2016. “Conversely, the contribution to turnover of local companies decreased to 55.4% in Quarter 3 of 2017 relative to 63.7% in the same period in 2016. This is evidence that there is potential to increase retail investor participation in the market,” reads the report.
When compared to the performance of other stock markets in the region in US Dollar terms, the BSE lagged behind the Johannesburg and the Mauritius markets.
In Mauritius and South Africa, the SEMDEX and the JSE ALSI respectively benefited from the appreciation of the domestic currencies against the US Dollar as the Mauritian Rupee and the South African Rand both appreciated by 2.4% and 0.9%, respectively, against the US Dollar.
In the year to date period, the pula strengthened by 3.3% against the US Dollar and this transformed into the DCI’s depreciation of 1.9% in US Dollar.