BSE reports listings unprecedented drought in 10 years
Government bonds sustained the bourse through the uncertainties of an election year
The Botswana Stock Exchange (BSE) says 2019 was not as pleasing as period as they had initially hoped for. In the annual results for 2019, chief executive Thapelo Tsheole says the period was a unique one for them as they got to experience a drought in new listings for the first time since 2009.
Tsheole notes that to some extent, this experience reflects the difficulty and uncertainty that characterises an election year
As at the end of 2019, the report states that there were 33 listed companies on the BSE comprised 25 domestic companies and eight foreign companies across the various boards. Board chairperson Tebogo Masire says political stability is the most important consideration in domestic and global capital allocation. He notes that the smooth transition following the 2019 general elections has alleviated political uncertainty and inspired confidence in international investor participation. While Botswana’s economic forecasts show optimism about the years ahead as the national budget speech projected growth of 4.4 percent in 2020, Masire says they remain highly alert to the sustained global economic uncertainty and the potential external shocks that always transcend into the local economy.
Data from the World Bank and other sources shows that markets worldwide are experiencing a dramatic fall in listings in relation to their peak years. At midyear, Africa’s Initial Public Offerings (IPO) were estimated to have declined by just over 28 percent, according to data compiled global law firm, Baker McKenzie. As a result of this trend, Tsheole says capital raising in equity markets has fallen dramatically.
He notes that activity in the bond market decreased marginally in 2019 relative to 2018. The value of bonds traded decreased by 2.1 percent from P2.2 million in 2018 to P2.1 million in 2019. The report says that government bonds continued to dominate liquidity of the market, accounting for 98.4 percent of total trades. The BSE listed five new bonds in 2019 compared to 10 bonds in 2018. At sector level, government bonds accounted for 68.6 percent of market capitalisation, quasi-government 0.5 percent, parastatals 6.4 percent, corporates 22.9 percent and supranational 1.5 percent.
There were 46 bonds listed on the BSE as at the end of 2019 compared to 49 bonds at the end of 2018. The total nominal debt market capitalisation amounted to P17.3 billion in 2019 in comparison to P15 billion in 2018. This increase in the size of the bond market is attributable to the five new corporate bond listings which added P627 million to the market capitalisation and government bonds tap issuances of P2.3 billion during the year
In 2019, the number of domestic companies that recorded declines in their share prices was less than the number of domestic companies that realised share price appreciation. On the other hand, the prices of companies remained unchanged. The top three gainers were Olympia Limited at 33.3 percent, Letlole La Rona (LLR) Limited at 27.8 percent and First National Bank Botswana (FNBB) Limited at 16.3 percent. LLR was also the most traded counter in the year.
The report explains that the domestic market held its fort with resilience in the year under review, notwithstanding a decline of 4.5 percent in total market turnover and a lower 4.6 percent decline in market returns relative to 2018. “To continue to better serve our stakeholders, we commenced the implementation of the new CSD system as part of our strategy on centralisation of trading, clearing and settlement of securities at the BSE,” says Tsheole, adding that this is expected to be commissioned in the second half of 2020.
Of the many things they were able to achieve, the stock exchange CEO says in the year under review they successfully cushioned listed companies against amendments of the Transfer Duty Act which will be effective in this period. Tsheole says with their lobbying, listed entities shall be exempted from the 30 percent transfer duty that the amended law imposes on entities defined as non-citizens.