While several stock exchanges around the world have experienced a knock due to the COVID-19 virus, Botswana Stock Exchange Limited (BSEL) has remained steadfast.
According to an analyst at Motswedi Securities, who also serves as the firm’s Head of Research, Garry Juma, this is largely because of BSEL’s illiquidity.
In essence, Juma explained there has been precious little buying or selling of shares.
“What has happened in other markets is that some investors were selling their shares in order to take their money to safe havens,” the analyst told Voice Money this week.
Meanwhile, the BSEL Chief Executive Officer, Thapelo Tsheole says there are many reasons for the local stock market’s unwavering performance amidst the global economic uncertainty caused by coronavirus.
Reiterating Juma’s illiquidity explanation, which he attributed to the excess pools of capital available in Botswana, Tsheole also highlighted the lack of panic buying as a key factor.
The CEO further attributed BSEL’s steady performance to the slow filtering of the effects of the virus into the local economy.
“BSE is the fourth liquid stock exchange in Africa out of 27 stock exchanges but the rest went negative and we went positive. Again the market has been undervalued for some time in terms of Price Earnings ratios, so it was likely to go up from the beginning of the year,” reasoned Tsheole.
It remains to be seen whether the BSEL will continue to withstand the pressure of the virus as negative effects are expected to be felt in the coming weeks. This is especially true after South Africa, a major trading partner of Botswana, announced a nationwide lockdown beginning this week.
The lockdown is meant to contain the spread of the deadly virus, which has seen the country registering nearly 600 cases this week.
“The economic impacts are already here, the question is to what extent will they affect us,” said Juma adding that even if a stimulus package was to be introduced, one way or the other sectors will continue to suffer.
BSEL market performance report for the first three months of the year show that the market returns for 2019 have continued into 2020, registering a steady performance during the first two and half months of the year.
The Domestic Company Index (DCI) has appreciated by 1.46 percent in comparison to a 0.34 percent appreciation in the corresponding period in 2019.
The Domestic Company Total Return Index (DCTRI) appreciated by 2.12 percent compared to 0.81 percent increase over the same period last year.