ADDRESSING LIQUIDITY CONCERNS IN Chief Executive Officer EMERGING - PowerPoint PPT Presentation

Thapelo Tsheole ADDRESSING LIQUIDITY CONCERNS IN Chief Executive Officer EMERGING MARKETS – LESSONS FROM World Exchange Congress BOTSWANA STOCK EXCHANGE 26 February 2019

Botswana Comparative Advantages Highest investment grade and sovereign credit rating in Africa ( S&P: A- and Moody’s: A2) Top 3 in terms of Governance (Ibrahim Index of African Governance) Why Botswana? Highest rating in Africa in terms of macroeconomic stability Least corrupt in Africa ( Transparency International) Stable political environment No Exchange Controls Page 2

Overview of the BSE Successfully Demutualized: Registered as a company limited by shares ( BOTSWANA STOCK EXCHANGE LIMITED ) in August 2018 Our Mission To drive sustainable economic growth by providing a gateway for raising capital and accessing investment opportunities. Our Vision To be a world-class securities exchange delivering innovative products and services. Corporate Values Commercial Innovation Integrity Efficiency Teamwork Sustainability Focus The BSE is a member of: Committee of SADC Stock Exchanges (CoSSE) • African Securities Exchanges Association (ASEA) • World Federation of Exchanges (WFE) • Partner Exchange - UN Sustainable Stock Exchange (SSE) Initiative • Recognised Stock Exchange – UK’s HMRC •

Market Indicators BSE Limited is the 2 nd largest Stock Exchange in Sub Saharan Africa Equities ETFs Bonds 34 3 49 1 Supranational (IFC) & 1 Eurobond (Investec) SECTORS (2018) STOCKS % MAR. CAP Indicators 2018 Financial Services 4 6.2% Market Capitalisation Retail & Wholesaling 6 1.8% Domestic Companies ($ ’Mn ) 3,953.6 Property 6 1.6% Foreign Companies ($ ’Mn ) 34,553.7 Banking 4 3.2% Total ($ ’Mn ) 38,507.3 Security Services 1 0.1% Tourism 3 0.7% Relative Performance Energy 1 0.4% Domestic Market Cap/GDP (%) 23.1 Telecoms. 1 0.2% Turnover/Avg. Domestic Co Mkt Cap (%) 4.3 Agriculture 1 0.5% Turnover/ Avg. All Co Market Mining & Material 9 85.2% 0.5 Cap (%)

Investor Profile CSDB Holdings by Client Category 1.9 Contribution to Turnover Investors 11.9 2018 Foreign Companies 40.6% 20.2 Foreign Individuals 1.3% Local Individuals 4.5% 66.0 Local Companies 53.2% Brokers 0.3% Local Company Foreign Company TOTAL 100.0 Local Individual Other Clients Local fund managers dominated due to • CSDB Client Holdings by Geography deep pools of liquidity Client Domicile 2018 Local Citizens 77.9% Significant international participation • US Citizens 1.4% UK Citizens 1.8% High levels of retail participation by • SADC Region 7.7% regional standards Other Regions 11.1% Total 100.0% Retail investors account for 94.4% of the • number of CSD accounts

Historical Liquidity Levels on BSE Equity Turnover: 2004-2018 3500 14 Turnover (BWP million)/Volume Trade (million) Average Daily Turnover (BWP million) 3000 12 Trading 2500 10 Fees 2000 8 ATS 1500 6 CSD 1000 4 500 2 0 0 Turnover (BWP million) Volume (million) Average Daily Turnover (BWP million)

Promoting Liquidity Timeline - SBL - Mobile App - Website with Analytics Implementation of ATS - Mentorship Programme Implementation of CSD -Open Days and advent of -Listing & Investment Conference dematerialization -Internationalization Strategy 2008 2010 2012 2014 2016 2019 -New Equity Listings Requirement Introduction of ETFs (Increased free float) & Introduction of Market -Making Introduction of the Serala Rules OTC Board -Tshipidi SME Board

Promoting Liquidity 3 pronged Approach Automation Market Education Regulation  Open Days  CSD implemented in 2008  Serala OTC Board (2014) - Introduced in 2016, held every - Advent of dematerialization - Platform for trading unlisted year - Settlement easier and faster securities to be trading - Meant take the Exchange to - Increased liquidity from BWP3.4  New Equity Listings the people million per day in 2007 to - Taught about the BSE and its Requirement (2018) BWP4.7 million per day in 2008 products as well as - Led to introduction of ETFs – - Demystifying the listing value - Increased of free floats on the NewGold in 2010 proposition Main and Venture Capital - Between 2016 and 2018 Open Market Boards  ATS implemented in 2012 Days have been held in 11 - New Tshipidi SME Board settlements - Replaced the Open Cry trading  Market Making Rules - Typical longer trading session  Listing & Investment (2018) than the open cry Conferences - Increase liquidity from BWP3.6 - Annual conferences held since - Formalized market making for million per day in 2012 to 2016 any listed securities BWP9.3 million per day in 2013 - Meant to attract more - Will ensure two way prices issuances  More technology to available at al times implemented in 2019  Securities Borrowing & Lending (2019) - New CSD with SBL capabilities - New Website and Mobile app - To be implemented in 2019 - DARS

Promoting Liquidity (cont’d) The BSE is currently spearheading a project to centralise the bond market • BUILDING BLOCKS OF A WORLD CLASS SECURITIES Key objectives: • Settlement in Central Bank Money – eliminates counterparty risk  EXCHANGE IN A FRONTIER MARKET Integration of CSD with Real Time Gross Settlement System (RTGS)  Primary Dealers to trade at BSE (secondary market)  Real time information flow, transparency, price discovery, liquidity  Improvement in IOSCO compliance, higher Thomas Murray Ratings  SADC Bond Markets Centralisation Initiative The “ sweet Chaired by BSE spot ” of liquidity Primary Dealers CoSSE Secretariat CoSSE Prod. Dev Sub-Committee Clients Brokers CISNA Capital Market Sub – Com

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