Large caps drag BSE southwards
Isaac Pinielo | Friday December 2, 2016 15:50
Dragged down by poor performance of large caps such as Choppies, Sechaba, FNBB, Stanchart and Letshego, the mainstream DCI has lost nine percent since the beginning of the year.
The market reached a 12-month low of 9,504.24 points mid-quarter before rebounding to close the quarter at 9,796.69 points. Market watchers have attributed the loss on the DCI mainly to the poor share price performances by large capitalisation counters.
Choppies released weak financial full-year results, which experts say weakened investor sentiment. Sechaba has also released poor results, while First National Bank Botswana (FNBB) is said to be struggling due to a grim economic outlook. Motswedi Securities market analyst, Moemedi Mosele stated that the DCI is market cap weighted, which gives a great bias to the large companies trading on the BSE, compared to an equally weighted index that would mean that each of the stocks on the local board are assigned the same weighting when computing the DCI.
“Unfortunately a quick review of the top eight companies by market capitalisation on the BSE shows that five of them depreciated in value under review,” he said.
According to Mosele, these large and significant double-digit losses dragged the DCI down, further amplified by the weighting bias.
He added that there is very little that can be done to contain the situation, noting that the market prices in what is expected in future, and the general outlook is rather bleak at the moment. The analyst also pointed out that the banking sector has been struggling and that with interest rates at historic lows, increased competition in recent times, and the massive job losses experienced this year, there are no major foreseeable changes in the near future.
“Two of the top three losers for the year are banks, with Standard Chartered losing by -30.4% year-to-date and the largest company on the domestic board, FNBB by -20.7% year-to-date with Choppies topping the list, lower by nearly 40%,” said Mosele.
Donald Motsumi of Stockbrokers Botswana reiterated that losses on the DCI were mainly due to poor performances by large-cap counters, noting that Choppies began the quarter on a negative trend, which was exacerbated by a trading statement from the group during the quarter giving guidance to poor results.
He however said the rebound during the period which reduced the DCI losses to 2.8% was largely fuelled by the Letshego share buyback programme, which resulted in the recovery of the share price and hence the DCI.
Letshego ended the quarter with a market capitalisation of P5.18 billion, the second largest on the DCI, with the total DCI market cap closing at P48.2 billion.