The Botswana Stock Exchange (BSE) has been advised to list renown international Exchange Traded Funds (ETF) like the SATRIX 40.

Analysts told BSE on Thursday that formulating an ETF requires liquidity, which the local bourse adversely lacks and the option is to go for the international funds. They said the planned introduction of ETFs on the BSE will transform the local capital market significantly. They were speaking at a one-day inaugural ETF comprehensive conference organised by BSE in partnership with Bifm at the Gaborone International Convention Centre (GICC). "It might be difficult to formulate the ETF based on BSE stocks because of lack of liquidity, unavailability of an index, the structure and size of your market. The option you have is to list international recognised ETFs," general manager of Satrix Securities Mike Brown said.

Satrix Securities are listed on the Johannesburg Stock Exchange (JSE). Its popular ETF SATRIX 40 gives investors the price performance of the FTSE-JSE Top 40 index.

Brown said the list of a foreign ETF will give local fund managers who export 70 percent of funds to domicile some of them locally by investing in the BSE listed ETF.

Some of the advantages of listing an international ETF include attracting bankers like Deutsche Bank to the country. "The ETF will have to be registered as a local product hence it will need a local custodian or banker registered locally. This will lead to international bankers and financial players like Deutsche starting operations in Botswana. The ETF will bring foreign investors who will be attracted to Botswana's friendly exchange rates."

Brown said the ETFs will attract retail investors because of their simple and easy to understand exposure to the markets. The other advantage is low cost and transparency.

Another analyst Nerina Visser from Nedcor Securities under the Nedbank Group of South Africa said if BSE introduces ETFs, it would be a phenomenal instrument that will bring much-needed liquidity.

Visser who is a quantitative strategist said she believes the instrument will be a success just like in other bourses.

She said Botswana will be the third country in Africa to launch ETFs after South Africa and Egypt. In 2007, there was 64 percent increase in ETF launch to 457. Assets under management of listed ETFs stood at US$ 796.6 billion as at December 2007.

BSE plans to have formulated the necessary logistics like listing rules by July this year. BSE CEO Hiran Mendis said they would invest on infrastructure needed to list ETFs adding that government has already helped fund the installation of Central Depository System (CSD).

"The CSD could be used to provide trustee services and can have the capacity to act as the administrator of the fund."

He announced that government would procure the Automated Trade System (ATS), which is needed for ETFs. The local bourse plans to install the ATS in mid 2009 but Mendis said it would be fast tracked if possible. BSE plans to structure ETFs as a Collective Investment Undertaking. They will be constituted under the Collective Investment Undertakings Act.