[2007-11-14]  Stock prices plunge to six-month low
The persistent fall in commercial bank share prices on the Botswana Stock Exchange has dragged down the Domestic Counters Index to a six-month low.

Coming from a mere two percent rise in the third quarter, the domestic index has maintained the downward trend, shedding 6.8 percent so far in the fourth quarter.

Last week, the DCI again shed one percent to close the week at 9104.87 points as big caps Barclays and Stanchart lost 1.1 percent and 3.2 percent respectively.

The three listed banks - Barclays, Stanchart and FNBB - take up the lion's share of the market capitalisation figures on the domestic board, amassing over P21 billion of the total P35 billion from the 19 counters on the domestic board.

In the first two quarters of the year, the DCI jumped by 26 percent and 23percent respectively, powered by the bull run in the large cap banks.

Analysts maintain that the self-correction by banks is still largely to blame for the demise on the domestic board which has seen its year-to-date growth retarding to only 46 percent from as high as 60 percent in August. "After having gained phenomenal growth without the backing of any fundamentals in the first six months of the year, the banks' self-correction, which started in the third quarter is set to continue to take the steam out of the domestic index," said an analyst with a stockbroking firm.

"However apart from the self-correction by financial counters, some risk-averse investors could be beginning to develop cold feet over financial counters following the credit crunch in the US which has left many investors on the international financial markets with burnt fingers.

The crisis began when US mortgage companies made hundreds of billions of dollars of inappropriate loans to individuals with poor credit histories. These debts were then packaged up and sold to financial institutions around the world, which then sold them on to pension funds and hedge funds. The problem now is that no one knows where these bad debts are concealed in the financial system and until then, banks will still be reluctant to lend to each other while investors will be suspicious of the health of the financial sector.

The credit crunch has affected most international markets from Wall Street to Hong Kong, whilst the weakening US dollar and the subsequent rise in oil prices has exacerbated the situation.Despite the fall of the domestic counters, last week the foreign companies index gained by a 0.5 percent on the back of comfortable gains in counters such as Diamonex, Anglo and CIC Energy.

Overall, the highest climber of the week was RPC Data, which firmed by 9.09 percent, while Discovery lost by the highest margin of 4.8 percent.

RPC Data has been on the firming path in the past few weeks following some serious battering in the year which saw the counter continuously anchoring the cheapest stock log on the bourse.

On the foreign board, Diamoex and Discovery have been the most active counters this year, buoyed by good corporate developments on the firms' mining projects. However, the two counters' rapid movements have continuously fluctuated, leaving no significant effect on the board while the fact that they are small caps has tended to dilute their impact.


Source: © Mmegi, Since 2002