Capital market impressive in 2014

Analysis of Equity Indices
The Domestic Company Index (DCI) declined by 1.1 percent in Quarter 1 and appreciated by 2.0 percent, 3.3 percent and 0.7 percent in Quarter 2, Quarter 3 and Quarter 4 (period up to 12 December 2014) respectively. On a year to date basis, the DCI appreciated by 5.0 percent in comparison to an appreciation of 18.4 percent in the same period in 2013.
In Quarter 1 and Quarter 2, the Foreign Company Index (FCI) registered an increase of 0.1 percent and 0.2 percent respectively, and a decline of 0.5 percent in Quarter 3. In Quarter 4 (period up to 12 December 2014) the FCI lost 0.2 percent. On a year to date basis, the FCI declined by 0.3 percent up to 12 December 2014 in comparison to a depreciation of 0.1 percent in the same period in 2013.

Analysis of Equity Turnover
The total turnover recorded in the year amounted to P2,106.6 million and is the second highest ever recorded in a similar period since the inception of the BSE.

Performance of Exchange Traded Funds (ETFs)
The NewGold ETF traded 51,239 units with a value of P5.6 million at prices ranging between P101.20 and P116.80 per unit. As at 12 December 2014, the price of the NewGold ETF had appreciated by 1.4 percent in Pula terms.
The BettaBeta ETF traded 4.0 million units at prices ranging between P35.45 and P43.25 per unit for a total value of P170.2 million during the period under review. The price of the BettaBeta ETF on the BSE had appreciated by 3.4 percent as at 12 December 2014.
The BSE listed an ETF that tracks the price of the platinum metal in global markets, called the NewPlat ETF, on 29 August 2014. The NewPlat ETF is the third ETF to be listed by the BSE and it is currently the world’s largest platinum ETF by assets under custody. NewPlat ETF has traded 215,088 units at prices ranging between P111.20 and P126.60 for a total value of P26.5 million since its debut in the local bourse. As at 12 December 2014, the price of the NewPlat ETF had depreciated by 12.2 percent in Pula terms.

INVESTOR CONTRIBUTION TO TURNOVER
Trading was largely accounted for by local companies with dominance in the three quarters of 2014. Foreign companies dominated in Quarter 2 and accounted for 52.7 percent of turnover. Contribution to turnover by local individuals improved significantly in Quarter 4 of 2014 reaching 7.4 percent of total turnover, although it remains below the level recorded in the same period in 2013.

COMPARATIVE PEFORMANCE OF THE BSE WITH  SELECTED MARKETS
Comparative Performance with other Indices: 1 January to 12 December 2014
On a year to date basis the DCI came top and outperformed the JSE ALSI, SEMDEX, and MSCI Emerging Markets Index with gains of 5.0 percent in Pula terms as can be seen from Figure 4. In US dollar terms, the DCI still outperformed the three indices as the impact of the Pula depreciation against the US dollar was minimal on the DCI returns relative to the impact the US Dollar appreciation has had on the returns from the JSE and the SEM. During this period the Pula depreciated by 8.2 percent against the US dollar.
Since the start of the financial crisis in September 2008, the DCI has recovered by 17.5 percent. In comparison, the JSE ALSI and the SEMDEX have grown by 83.9 percent and 26.3 percent respectively.

Analysis of Bond Market Activity
The Bank of Botswana (BoB) held a total of four auctions of Government Notes in 2014 under the P15 billion Note Programme. In the first auction of the year, held in March, BoB auctioned P150 million of BW011, of which P149 million was allotted. The bond was 1.9 times oversubscribed indicating increased demand for long term paper given the supply at the time of the auction. In addition, a P340 million six month Treasury Bill was issued. The T-Bill was oversubscribed by 2.6 times and fully allotted.
On 6 June, an amount of P558 million was raised in an auction comprising a six month Treasury Bill (P340 million) and three bonds comprising of BW008 (P25 million), BW010 (P100 million) and BW011 (P93 million). All securities were oversubscribed. In the third auction in the year on 5 September, an amount of P427 million was raised in an auction comprising a six-month Treasury Bill (P340 million), and BW011 bond (P87 million). The two securities were oversubscribed by 1.8 times and 1.6 times respectively. BoB held the final auction of 2014 on 5 December, offering an additional P50 million and
P150 million of the BW008 and BW011 bonds as well as a six month Treasury Bill (P340 million). The BW008 was fully allotted at an oversubscription rate of 1.5 times and only P142 million of the BW011 was allotted with the bond 2.2 times oversubscribed.  The Treasury Bill was 1.5 times oversubscribed and the Bank allotted only P199 million of the P340 million on offer.
The total value of bonds traded in the period ended 12 December 2014 amounted to P321.6 million, compared to P94.6 million over the same period in 2013. The trades were on account of government bonds as was the case in 2013.
There was no liquidity in corporate bonds.  In 2014, 3 bonds were listed (with a total value of P321.2 million) in comparison to 7 bonds in 2013 (with a total value of P949 million). Only 1 bond has matured thus far in 2014 compared to 6 bonds that delisted in 2013.
The total number of listed bonds was 37 in 2014 in comparison to 35 in 2013. As at 12 December 2014, the BSE’s debt market capitalisation was P10.1 billion compared to P9.3 billion as at the same date in 2013.
Performance of Bond Indices
The BSE launched three bond indices in April 2013. The three indices comprise the Government Bond Index (GovI), the Corporate Bond Index (CorpI) and the Composite Index (BBI). It is noted that the bond indices have been well received by the market with most trustees and custodians using the indices for benchmarking, performance evaluation and pricing of portfolio holdings. In 2014, the BBI registered a return of 4.2 percent, whilst the GovI and the CorpI appreciated by 4.0 percent and 4.3 percent respectively.

PRIMARY MARKET ACTIVITY IN EQUITIES
Magnum Gas & Power Ltd, a coal bed methane and petroleum explorer with prospecting licenses in Botswana and coal seam gas tenements in New South Wales Australia, was listed on the BSE’s Foreign Venture Capital Board on 1 December 2014. The company is primarily listed on the Australian Stock Exchange.
Hana Mining listed a total of 850,375,705 shares at a reference price of 4 thebe per share.  In both 2014 and 2013, there was only a single listing on the BSE by Magnum and Shumba Coal respectively. Only Hana Mining, delisted in 2014, whereas two companies, Aviva Corporation and RPC Data delisted in 2013.
* Tsheole is BSE Deputy Chief Executive Officer