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Inflation stokes share price surge

Staff Writer
Buyers continue to outweigh sellers at the Botswana Stock Exchange (BSE) as investors seek to hedge their funds against the ever-rising inflation rate.

Although the pressure has not been persistent or strong enough to warrant a bull run yet, the mainstream DCI has been making good recoveries from the heavy losses it experienced in the last quarter of 2007 and the first quarter of this year.

Inflation, at 14.5 percent for the month of June, has been a strong driver of share prices on the bourse as more and more fund holders chase stocks in a bid to safeguard the purchasing power of their money.

Although last week was short due to the Presidents' Day holidays, the DCI surged further ahead, adding 0.14 percent to 7,266.73 points on the back of gains in BIHL, RDCP and Letshego.

Micro-financier Letshego was buoyed by the good news of the expected good results, as the company board announced last week.

The Letshego board said it expects its interim financial results for the six-month period ending 31 July 2008 to be materially higher than the previous period due to continued growth and performance across all its existing businesses.

On the other hand, Discovery Metals was the biggest gainer for the week in which the FCI remained flat, going up 6.88 percent to 295thebe on the announcement of the results of a pre-feasibility study at its copper project.

The results of the pre-feasibility study show that mining and processing will be relatively simple and that infrastructure is obtainable at reasonable cost. The report has also indicated that based on conservative assumptions for costs and selling prices, the project's economics are encouraging.

The company is now expected to start a Bankable Feasibility Study (BFS), which will be followed by construction. Discovery

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Metals, which expects to commission the new mine by 2010, was recently granted seven more tenements extending from the boundary of the 2005 granted tenements to the Namibian border, adding about 5,700 square kilometres to the area it holds under prospecting licences to bring the total tenement area to 12,100 square kilometres.

The biggest loser for the week was African Copper, down 12.54 percent to 369thebe.

Diamonex also lost 8.2 percent to 146thebe, while Furnmart closed the week 0.7 percent lower at 1,380thebe on profit taking.

Meanwhile, a report by Motswedi Securities says the recently announced 70-percent general tax hike on all alcoholic beverages will impact on volumes for Sechaba, especially in the company's sub-premium beer section where demand is price-sensitive.

"We also expect volumes to decline due to the fall in disposable incomes," the report said. "This will subsequently hurt top-line growth of the company, and hence earnings. 

"For the week, Sechaba closed unchanged at 1,880thebe on 3,700 shares and on a year-to-date basis is up 10.6 percent."

In another development, the BSE has said it will add six companies to the Central Securities Depository (CSD) to the three existing ones. The CSD went live on May 22 with three companies, namely, First National Bank of Botswana, Sefalana and Turnstar.

RPC Data, ABCH, G4S, MRIB, BIHL and Standard Chartered Bank are expected to start trading on the CSD as of August 11."Investors are therefore advised to open CSD accounts if they wish to purchase and sell shares in the said companies through any of the existing stockbrokers who are members of the BSE," said the BSE in an announcement.



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