Capital market investors were rather stingy in 2016, trading fewer shares on the Botswana Stock Exchange (BSE) than they did in 2015, leading to a decline in the BSE’s turnover.
At least 778 million shares were exchanged at the hands of investors during the 12 month period ending 31st December 2015, but the shares were fewer than the 803.1 million, that were traded by investors on the BSE during the previous corresponding period.
After trading 803.1 million shares in 2015, the BSE at the time recorded a record breaking turnover of P3 billion, though the turnover declined to P2.5billion in 2016. The BSE said the average daily turnover for 2016 amounted to P10.2 million relative to P12.2 million per day in 2015.
Chief Executive Officer (CEO) Thapelo Tsheole said that the decline in trading activity could be partly attributable to the adjustment of the brokerage commission structure in April 2016 that introduced a floor of 0.60 percent on commission charged by Brokers.
“The BSE will continue to observe the extent to which the change in brokerage commission will affect trading activity going forward, but it is thus far of the view that this is not a prominent factor.” The Central Securities Depository Company Botswana (CSDB), a fully-owned subsidiary of the BSE decided to increase the Minimum Levy on listed companies from the current P5 000 annually to P10 000, while maintaining the current cap of P15 000 annually around April last year. Transaction fees have been kept at P5. Further, the CSDB, which was established in 2008 to make trading at the BSE efficient, said it had also resolved to increase CSD Transaction Fees, which affects stock brokers and individual investors, from the current 0.10 percent to 0.12 percent, all of which would come into effect on April 1 this year.
The performance of the Domestic Companies Index (DCI) declined by 11.3 percent in 2016. The decline was attributable to the negative performance of the Retail & Wholesaling and the Banking sectors as well as the Financial Services & Insurance and the Information & Communications Technology (ICT) sectors. In aggregate, the BSE said the four sectors contributed 15.8 percentage points to the depreciation of the DCI.
On the other hand, sectors that contributed positively to the DCI performance were the Property & Property Trust, Energy, Security and Tourism sectors with an aggregate contribution of 4.5 percentage points.
Historically, the DCI has been heavily influenced by the Banking sector. Tsheole said the market capitalisation of the Banking sector relative to total domestic market capitalisation has declined from 46.9 percent as at 2012 to 30.5 percent in 2016 primarily due to additional listings in other sectors such as Retail & Wholesaling and ICT over the years.
“This has helped to reduce the reliance of the DCI on the Banking sector performance which is ideal given that the index should to a larger extent be representative of the overall performance of all companies listed on the Exchange.”
Blue-chip microfinance firm, Letshego Holdings Limited continued to dominate the liquidity on the BSE as its contribution to overall volume of shares traded (domestic companies) increased from 34.4 percent in 2015 to 42.3 percent in 2016. Other liquid stocks included New African Properties and Choppies which accounted for 20.8% and 12.7 percent of volume traded respectively.