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of 8.9% in the national economy in 2020 which was
against this challenging backdrop.
WAITING FOR THE STORM TO END
WHILE INVESTING ON PROMISE/ HOPE
A very opaque learning curve was traversed by
investors who had to ‘bank on hope’ continue with
the ‘gamble’ and wish for the best to come. The BSE
market performance trend report will teach us how
Investors looked
at businesses or
sectors which were
relevant during
Covid-19 lockdowns,
if not they sold their
securities and ran
away.
investors fared amid the storm
and after the dust settled. During
this time the BSE has been trying
to find ways of improving the
resilience of the domestic capital
market.
Last year ended without new
equity listings, but additional
share issuances on the BSE
raised capital amounting to
P103.9 million and P86.5
million on the domestic board and the foreign board
respectively.
“In 2020, we aggressively promoted the listings
value proposition and it has been heart-warming to
note the appetite by several companies to list in the
short to medium term. Interestingly, the pandemic
has challenged most unlisted companies to
restructure and look for avenues of sustainable long
term capital, being the stock exchange, which is very
important in pandemics such as this that negatively
affect solvency and access to traditional finance,”
says BSE of its attempt to keep the domestic index
going.
No one wanted to list their company amid
Covid-19 sweeping disruptions, meaning the risk of
investing in equity was heightened by the ongoing
circumstances, many sold while few bought.
WHAT THEY DID
DURING THE PANDEMIC AT PEAK?
In the 4th quarter of 2020, when bad things began,
banks like ABSA and FNBB together with microlender
Letshego were most performing while most of the
companies collapsed. Beer brewer Sechaba also held grip.
A lesson learnt is that investors looked at businesses or
sectors which were relevant during Covid-19 lockdowns,
if not they sold their securities and ran away. The banking
sector remained standing as investors banked on the hope
that digital technology would save their money while
businesses were at standstill.
“Given the envisaged and unfolding economic impact of
the COVID-19 pandemic, most lenders would increasingly
become frugal and borrowers, being corporates, could
be compelled to increase their levels of equity capital.
One of the ways of achieving this is by floating their
shares on the BSE to raise funds from the public. Practice
has demonstrated that a listed company tends to be
progressively credible for further lending by private
institutions as, among several considerations, a diversified
capital structure reduces its credit risk,” in September,
BSE tried to explain the business sentimental link between
lenders and registered companies beyond the two just
trading in the same security market.
But the resilience of lenders was short-lived as ABSA lost
more than P7 million while FNBB lost over P10 million in
the third quarter of 2020.
Even the micro-lender, Letshego, which has been seen as
hope because of its said to be sustainable loan book lending
to the public sector, collapsed in the third quarter of 2020.
This means for one to invest in equity, they should gauge
the sentiments of the whole market and see where it is
moving. Due diligence and research are needed.
According to BSE, the top 3 traded companies during
the period under review were Letshego (P170.7Mn), FNBB
(P81.2 Mn) and Sechaba (P78.0 Mn). Even though the total
turnover from these 3 companies accounted for 47.2% of
total equity turnover, with the leading counter Letshego
accounting for 24.4% of total equity turnover, the high
volatility of the market in 2020 placed uncertainty on
where one can place their mind on.
You could buy or sell and then get unprecedented results,
like in the case of the lending sector’s stocks losing grip
after holding on for the better part of the second quarter of
2020 when there was a battle with Covid-19. MBW
12 MorataBW March 2021