BSE geared for more bulls after record 2015
Brian Benza | Friday January 8, 2016 12:38
At a time when most emerging markets were bearish due to the slump in commodity prices, exchange rate volatilities and overall economic slowdown, the BSE was resilient in 2015 with the mainstream Domestic Companies Index (DCI) firming 11.6 percent in comparison to growth of five percent in 2014. Thapelo Tsheole, the bourse’s new CEO, believes the performance of the DCI is testimony of the confidence that investors have in domestic companies despite the local economic growth prospects having been slashed from 4.9 percent to 2.6 percent in 2015.
“During 2015, 803.0 million shares were traded. The trades yielded a record P3.0 billion in turnover. This is the highest amount ever recorded in the history of the BSE and it overshadows the last previous record of P2.3 billion in 2013, whose closest comparative was the P2.2 billion in 2014. This is an indication of the increased appetite for BSE listed companies,” he told BusinessWeek.
The spread of shareholders that contributed to the record-breaking turnover was diverse, ranging from local institutional investors to foreign institutional investors as well as both local and foreign retail investors.
Despite the number of listed counters having reduced by two on the domestic main board due to the delisting of ABCH and FSG, market capitalisation of the BSE domestic board increased by 8.7 percent from P46.2 billion at the end of 2014 to P50.2 billion at the end of 2015, representing growth and value addition to investor portfolios.
According to Tsheole, the performance of the BSE in 2015 is not only attributable to the initiatives adopted in that year, but also those implemented in previous years.
“This phenomenal performance has been attributed to continued market development initiatives which involve teaching the public about the stock market through participation in trade fairs, public presentation, newspaper articles, publications and television and radio presentations.
“The benefits of reaching out to investors have manifested in the form of increasing shareholder accounts in the Central Securities Depository (CSD) and also through increasing contribution to turnover by retail investors,” he said. From as little as a three percent participation by retail investors eight years ago, the involvement by retail investors, which are mostly Batswana households, have increased by over three fold to hover between eight percent and 15 percent in the years 2012 to 2014.
Retail investor participation however took a slight knock in 2015.
A major boost to retail investor participation was a result of the introduction in the Automated Trading System (ATS) in 2012, which helped improve the BSE’s reach.
“Efforts to increase retail investor participation are an on-going initiative and the BSE is looking at various ways to continue to reach out to the public, and in 2014 we introduced X-News which sends email alerts to investors who have subscribed to it whenever listed companies make announcements. It is the BSE’s future plan to make X-News available by SMS, to leverage on the ATS and existing technology to introduce Internet based trading.
These initiatives will go a long way in promoting inclusion of individual investors in the stock market,” he added.
Other initiatives that are expected to boost investor participation and liquidity going forward include the listing of more Exchange Traded Funds (ETFs) with a view to diversify the product base.
Last November, Barclays listed its inflation-linked bond index Exchange Traded Fund (ILBI ETF) to become the fourth ETF to trade on the BSE following the listing of Absa Capital’s NewGold in 2010, Nedbank Capital’s BettaBeta ETF in 2011 and Barclays Africa NewPlat last year.
Further, the BSE has commenced the process of demutualisation whose overarching outcome is to make the exchange more competitive as demutualisation ultimately culminates in corporatisation that enables the exchange to pursue commercial objectives.
“One of the things we have commenced is full dematerialisation of listed securities as well as the implementation of market-making (whose rules await regulatory approval).
These two initiatives will go a long way in improving efficiencies and liquidity on the Exchange. Further, the much awaited listing of BTCL on the BSE will add to our product offering tremendously as well as add to the sectoral diversity of the bourse,” said Tsheole. While the market gained unprecedented momentum in 2015 in Pula terms, in dollar terms the bourse lost 5.5 percent due to the strengthening of the green back against most currencies including the Pula. In 2015, the Pula depreciated by 15.3 percent against the U.S dollar.
However, the BSE’s DCI outperformed its counterparts as the MSCI EM lost 17.0 percent during 2015.
Last year, the Zimbabwean Stock Exchange, which trades in U.S dollar, was 29.45 percent weaker as most blue chip companies were weighed down by negative economic performance as well as policy and political uncertainty.
The JSE All-share Index also suffered a 22.55 percent loss in U.S dollar terms while the Zambia’s LuSE All Share Index was Africa’s biggest loser in dollar terms in 2015 after dropping a massive 45.80 percent. Other African markets to fall in dollar terms were the Nigerian Stock Exchange All Share Index which lost 23.43 percent, Kenya’s FTSE NSE index down 23.58 percent and Ghana’s GSE ALSI, which tumbled 25.44 percent.
“When looked at differently, a depreciation of the local currency bodes well for investors who have diversified their portfolios between local equities and foreign assets, particularly in the year that local equities have also done very well,” added Tsheole.