Trading of bonds dips as corporates balk
Isaac Pinielo | Wednesday October 26, 2016 18:00
A recently released quarterly report by the Botswana Stock Exchange (BSE) showed that the value of bonds traded in the first three quarters of 2016 was P240.8 million in comparison to P751.1 million traded over the same period in 2015.
Market development manager at the bourse, Thapelo Moribame told Mmegi Business that the total bond turnover was a result of concentration of trading activity on one government bond, BW003.
She noted that there was no contribution from corporate bonds, and that the bondholders were gradually offloading the BW003 bond off their portfolios as it was nearing maturity, leading to high concentration of that bond.
“Obviously, concentration of trading activity on one bond or one sector is not good,” Moribame said. She said ideally, they want to see broad-based contribution to trading activity from various bonds and various sectors, adding that this is what has been witnessed so far in 2016 from government bonds and corporate bonds despite the slowdown in turnover.
According to Maribame, the bond market has gone through numerous cycles over the years. She indicated that turnover levels had fluctuated from one year to another. She cited 2015 as an example, saying it was the best year with total turnover reaching an all-time high of P858 million in the bond market. “This was in a year where we had not recorded any trades on corporate bonds, but this year has been impressive in terms of trading activity on corporate bonds,” she said.
Moribame further pointed out that the bond market is a ‘mixed bag’ with varying fundamentals behind it, hence thus far in 2016 the BSE has experienced a slowdown in turnover relative to the same period in 2015.
She said that it is not the first time in the history of the BSE that annual bond market trading activity had declined. In 2013, the bond turnover declined to P77.9 million from P332.2 million in 2012. She said the BSE has put several initiatives in place to promote awareness on the bond market, address certain structural impediments hampering development, attract listings to the bond market and promote its growth and liquidity. Some of the initiatives include the promulgation of the Botswana Bond Market Strategy in 2010.
“The strategy was aimed at identifying the bottlenecks and issues impeding the development of the bond market and the resolutions thereto,” Moribame said.
There are currently 39 bonds listed on the BSE up from 37 last year. As at the end of the third quarter of this year, there were 33 listed corporate bonds with the remainder being government-owned.