BSE anticipates more listings

The Retirement Act - which is expected to inject about P13 billion into the local market as pension funds adopt a 50/50 portfolio split between domestic and foreign investments – should result in more listings on the Botswana Stock Market as more funds become available, the Head of Market Development at the BSE, Thapelo Moribame, told The Business Weekly & review in an interview this week. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="3" ] “The exchange offers a platform for companies to raise capital,” Moribame noted. “On the listings side, if entities take advantage of this increase in onshore allocation and structure instruments to attract this capital, it could mean more listings for the exchange. On the investment side, this could increase liquidity in the market. Overall, this increase can have positive spillover effects in the market, provided there is efficiency.” She added that the increase in the onshore allocation of pension funds will mean there will be more capital available as opposed to the prior setup where Botswana exported most of its pension funds money. The onus, Moribame emphasised, will be on local entities to structure instruments that these funds will be channeled into. While the minimum free float for listing on the main board of the BSE is set at 30 percent, Moribame said the increase in onshore allocation has no direct correlation with companies meeting the free float because that is a result of many variables. However, she noted, it means that there will be more funds available for investible instruments. She emphasised that the BSE has no plans to increase the 30 percent minimum required for floating to accommodate the influx of funds coming into the country, saying a number of factors are considered when setting the free float, among them adherence to international standards. Moribame anticipates that opportunities for product development will grow and the bond market become more active as issuers develop investible products to take advantage of the availability of capital. The increased issuance of government bonds and private sector bonds should become a catalyst for infrastructure development in the country. Regarding whether the changes will help foster development of the local debt capital market that has been on the agenda of Bank of Botswana (BoB), Moribame explained that the debt markets should also benefit from the available deep pools of capital. In addition, the government and corporates will have funds available for infrastructure development, should they wish to issue bonds on the BSE. Meanwhile, in response to The Business Weekly & Review’s enquiries about the impact of changes made to the Retirement Act, the Bank of Botswana (BoB) says while expected inflows resulting from the key change presented in law has the potential to significantly increase market liquidity, it will be a gradual process consistent with the transitional arrangements for repatriation of funds. The process to repatriate the funds will be in phases starting from 2023 through to 2025 when the 50/50 balance will be achieved. Regarding what the repatriated funds will mean for the liquidity position of the banking sector and the country’s financial system, BoB says it anticipates that the inflows will help stimulate demand for government securities that has declined considerably over the past couple of years. This should in turn support domestic capital market development and the government’s budget financing needs. “It is to be noted that the benefits of a vibrant domestic capital market go beyond providing a reliable source of funding to government,” Dr. Seamogano Mosanako. Head of Communications and Information Services at the BoB. “It can also facilitate positive spinoffs on development of financial sector, its efficacy, and its flexibility in terms of monetary policy conduct and resilience to financial stability. Furthermore, the inflows may also facilitate the development of other instruments/markets (e.g. inflation-linked bonds, repo market, derivatives), hence offering alternative diversification opportunities to domestic investors and overall enhancing market liquidity.” BoB emphasised that experience elsewhere has shown that a well-regulated, predictable, reliable, and liquid domestic market can play a critical role in supporting economic growth. [/ihc-hide-content]

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