Home » News » Business » Ice cold local market still unperturbed by election hangover

Ice cold local market still unperturbed by election hangover

Publishing Date : 05 November, 2019

Author : TSAONE SEGAETSHO

Latest market observation depicts lukewarm local bourse with less action amid hangover from the seemingly unpredictable and uncertain polls. A general notion is that foreign investors are not yet ready or treading carefully not to pop out money and pour it into the local market yet.


The local market has been dogged by illiquidity and this year of elections has been referred by market specialist as “worse than other years,” prompting belief that the issue of former President breaking ranks with his successor before joining opposition could spell the highest political uncertainty for this country, a huge scare for foreign investors.


The market has been shaking at a small movement days before the general elections, just as it has since the beginning of 2019. Stockbroker Motswedi Securities recently said, when opening the week (this after coming from the polls) the market wasted no time getting into the groove of things. The stockbroker further said as volumes traded amounted to 12.6 million shares with a market value of P16.1 million - of which traded across 10 stocks on the domestic main board.


“Leading the trades was Letshego, claiming the bulk of session's liquidity with 10.25 million shares in the name changing ownership, with a worth P8.2 million. The stock's demand has been increasing exponentially, since the price stepped down to where it is now, i.e. its lowest valuation in its history of being listed on the exchange,” said Motswedi.


On Monday only a slight price movement was registered by Barclays bank whose stock climbed 4 thebe in the session to P5.45/share as 71,728 shares moved across the board as investors booked profits. However, the Barclays price rise has no links to the elections aftermath, the slight share price upswing was merely the investors’ reaction to the company’s rise in profits for its current financial year and payment of a net dividend of approximately 12.94 thebe per share.


According to market statistics, just a week coming from elections and last week’s public holidays, 12,591,498 traded on Monday while a turnover was P16 090 407. Just a day before the elections, Motswedi Securities said the market was thrumming with activity jumping from trading 2 121 448 shares on the second week of October to 4 140 699 shares.  


A day before the national polls (22 October 2019), a general observation by Motswedi Securities was that, “investors were trying to make up for the lost next couple of days as the national elections commence. The local equity market traded volumes just above 4.14mn, to get to a turnover of just under P13.83, moving across 14 stocks.”


After the polls, this week, shares in the Botswana Stock Exchange increased its trading by three times, hopping from 4 140 699 to 12,591,498. This could mean investor confidence is slowly being recovered by the local bourse. But market experts remain skeptical of the local market saying it continues to be “slow and inefficient” and illiquid. A lot of experts did not expect the local market to shake much after the elections because it has always been synonymous with illiquidity and it is a very small market.


When making an analysis on African capital markets titled ‘Driving liquidity in African capital markets’, the Botswana Stock Exchange (BSE) Chief Executive Officer Thapelo Tsheole, highlighted limited foreign investor participation as one of the factors contributing to the continent’s susceptibility to illiquidity.


Stockbrokers Botswana recent market commentary, which was done out of the research carried out a day before the elections is that; the Domestic Company Index was flat at 7526.85 points, a similar for the Foreign Company Index which was also flat closing at 1564.54 points. In the elections week, Stockbrokers Botswana said the short trading week saw turnover coming in at P20 845 806 as 6 262 147 shares traded. In that week, the largest contributors to turnover were FNBB (39 percent), Sechaba (25 percent) and Barclays (11 percent).


A previous week before the elections Stockbrokers Botswana said, the Domestic Company Index ticked up by 0.16 percent to close the week at 7472.45. The Foreign Company Index has remained flat for weeks as it closed at 1564.54 points. BTCL was the biggest gainer this week, up 4 thebe to close at 105 thebe. Total turnover for the week amounted to P14 961 093 as 1 846 272 securities exchanged hands. For the ET, NewGold held the lion’s share of turnover with 82 percent. BTCL’s share was 4 percent while Letshego’s was 3 percent.


How the markets fared in a quarter (Q3) towards elections

According to Stockbrokers Botswana’s latest released research on market performance during a quarter before election, Quarter 3(Q3) the Domestic Company Index depreciated albeit at a slower rate, losing 2.12 percent compared to a contraction of 3.34 percent in Q2. ‘’The Domestic Company Index reached a 12-month low of 7397.77 points in August, however, it recovered over September to close Q3 at 7460.95 points,” said Stockbrokers Botswana Q3 research.


According to the stockbroker, the downward movement of the domestic index can mainly be attributed to Letshego which lost 59 thebe (41 percent) during the quarter. Stanchart was the second biggest loser after it lost 13 thebe (12 percent). “Conversely, majority of counters on the Domestic Company Index recorded prices which either increases or no changes at all. Only 7 counters experienced downward price movements during the quarter. The biggest gainer was Letlole which climbed up 16 percent.’’


Also in the third quarter, BTCL joined the top performers for the first time since 2017, appreciating 13 percent to close the quarter at 101 thebe.  In the ETF board NewPlat (+10.9 percent) and NewGold (+10.2 percent) made the top 5 gainers list once again, as seen in Q1 and Q2. Cresta gained 9.1% to reach 132 thebe, which is its highest price since 2011.


According to Stockbrokers Botswana, Total turnover amounted to P458.2 million (Q2 2019: BWP582.2 million) off of an exchange of 130.9 million securities (Q2 2019: 101.5 million securities). The lion’s share of these figures was held by Far Property Company (FPC), following a related party transaction which accounted for 50 percent of total turnover and 70 percent of total volume, said Stockbrokers Botswana. Just like what observers have been saying about this elections year, StockBorkers Botswana said low trading can only suggest that the market remained starved of liquidity in the third quarter, the period of the polls.


In Q3, Stockbrokers said, the market capitalization declined 6 percent to BWP38.5 billion (Q2 2019: BWP40.8 billion). This was weighed down by losses in Letshego and Stanchart, as well as the Wilderness delisting which occurred in the beginning of July. Stockbrokers Botswana said, weighted P/E Ratio was marginally lower at 11.2x (Q2 2019: 11.3x) while dividend yield was 5.5 percent from 5.3 percent in the last quarter.


Moody’s vindicated or is still early?

While other think tanks predicted BDP to win with a slight margins and elections to be chaotic, the US Moody’s before the polls said Botswana will not head to any political instability. Moodys said it expects limited election-related policy uncertainty in Botswana, Namibia, Senegal and Ghana, “given their track records of political stability.”


While there was no uproar after the election results were released, most in the opposition front are skeptic of how elections were run. Some allege the elections were flawed and unfair, accusing the elections body to have fraudulently swayed election win to the ruling BDP.  A court application against the results is said to be looming, raising much political uncertainty hence further investor fright which has been worse since the beginning of this year. This might dent Moody’s trust on Botswana which calls this country politically stable, this is if things go out of control.


BDP won this year’s elections by 51 percent and this contradicts Africa’s leading bank by assets Standard Bank’s prediction which said while BDP will win, it will be without an outright majority. The bank said an ongoing feud between the current President and his predecessor has wrought political unrest in the country. However the bank was still hopeful of Botswana even before this month’s polls saying: “We view the current political turmoil as temporary; we expect no significant deviation from the current economic policy, even if the BDP lost the election.”


Most surveys and researches predicted that the 2014 elections in which BDP’s 46 percent vote will shrink even further. BDP got a popular vote of 53.3 percent in 2009. According to Afrobarometer survey conducted in July/August 2019, BDP would enjoy a 2-to-1 lead over the opposition UDC 44 percent to 22 percent. Many have been caught by surprise with this year’s elections because many predicted lower than 46 percent lead by BDP, given the damage caused by its former leader Ian Khama. Some even predicted a “hung parliament.” That is why the election results remain debatable and doubtful to some while few accepted results.

POPULER BRANDS