Stock market illiquidity blamed on pension fund dominance :: Mmegi Online

With over 80% of the Botswana Stock Exchange’s free-floating stock in the hands of local pension funds, traders, and listed companies have pointed to this as the reason for liquidity crunches that have troubled the bourse for many years.

The availability of free-floating stocks, or the shares available for trade in the exchange, result in higher liquidity in the market because players can actually have options to buy and sell. The local exchange has a requirement for all listed companies to maintain a 30% free-float, but pension funds hold the majority of this for their long-term investment horizons.

In a market update session hosted by the Debswana Pension Fund (DPF) recently, BSE chief executive, Aupa Monyatsi, said the exchange was aware of complaints over the lack of sufficient free float in the market and the resultant liquidity crunch.

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