By Brian Benza, The Monitor

Coupled with the perceived cheap valuation of the counters, the prevailing low interest rate regime is likely to push up investors’ appetite for shares this year on the Botswana Stock Exchange, analysts reckon.

In a market report, stockbrokers Motswedi Securities say after recording modest growth in 2011, the local bourse is likely to perform better this year because investors will look to buy more shares.

Since the 2009 recession, the Bank of Botswana has deliberately kept interest rates at their lowest possible level in a bid to boost economic activity, a development that has made money markets or fixed income investments less attractive.

On the other hand, analysts believe most stocks on the BSE are still underweight and that now would be the best time to take positions on the market.

“Looking ahead into 2012, after ending the year at a weighted average Price to Earnings ratio of 9.8x from the levels of 10.8x by the end of 2010 and levels of 12.6x by the end of 2008, the market is relatively underweight at the moment and we expect demand for shares to improve across the board as value investors take advantage of the market’s cheap valuations,” reads the report.

“We foresee the lower interest rate environment to continue weighing on banks due to depressed margins. However, it is encouraging to note that most banks have taken initiatives to diversify their revenue lines away from interest income.” Motswedi’s top picks for the year include counters such as ABCH, Barclays, FNBB, FSG, Furnmart, NAP and Turnstar. “Investors should also be on the lookout for Choppies which, is expected to list on the 26th of January,” the research note says.

However, the report predicts that volatility in commodity stocks will continue into 2012 amid uncertainties surrounding the European sovereign debt crisis.

In 2011, liquidity improved on the local bourse on the back of increased demand for local assets from both domestic and foreign institutional investors as around 458.7million shares valued at P1.1billion were traded.

The last time the market traded turnover in excess of P1 billion was in 2008 when P1.2 billion worth of shares were traded. In the previous year, around 296.7 million shares valued at P962.8 million were traded on the BSE.Against this backdrop, the Domestic Companies Index (DCI) finished the year up by 8.70 percent to 6,412.94 points, its highest year-end finish since the 2008 financial market turmoil that saw the market end the year more than 16 percent down.

The Foreign Equity Main Board, on the other hand, was painted red, with most of its listed companies ending the year in negative territories tracking performances from their primary markets amid continued European sovereign debt crisis.

“Despite these conditions, the Foreign Companies Index (FCI) managed a 1.79 percent gain for the year, lifted by gains in Blue and Discovery Metals,” says the Motswedi report. Security giant G4S jumped the most for the year, up by 88.1 percent to end the year at 600 thebe. G4S, which is regarded as a defensive stock on the local market, had an impressive performance during the year under review after the ten for one share split.

Next in line was regional banker ABCH that soared by 85.7 percent to 455 thebe. Despite some selling pressure on the stock towards year-end, the pan-African bank remained one of the best performers during the year.

On the downside, CIC Energy was the biggest shaker in 2011, losing 70.6 percent of its value to end the year at 1,250 thebe. A-Cap Resources tumbled by 48.8 percent to end 2011 at 167thebe while Firestone, which marked its first year-end on the Foreign Main Board, was the third biggest loser, falling 47.5% to end at 176 thebe.Olympia Capital led shakers on the domestic main board, plunging 48.9 percent to end the year at 23 thebe.