EZULWINI – Concentration risk on the Eswatini Stock Exchange (ESE) has emerged as the most pressing structural vulnerability in the domestic capital market.
This is according to the Central Bank of Eswatini’s latest Financial Stability Report. The report reveals that two companies, FNB Eswatini and Royal Eswatini Sugar Corporation (RES Corp – now account for more than half of the total market value, creating a situation where movements by a single listed firm can significantly sway market performance.
The central bank notes that market capitalisation fell to E6.7 billion in June 2025 from E6.9 billion the previous year, marking a 3.8 per cent decline.
This contributed to a weakening market capitalisation-to-GDP ratio, which slipped to 6.8 per cent from 7.8 per cent. The figures highlight the shallow size of the domestic stock market relative to the broader economy and highlight the limited pool of listed corporates available for public investment.
The ESE All-Share Index, which tracks the performance of all listed firms, declined by 3.4 per cent year-on-year, falling from 492.0 to 475.4 in June 2025. While the overall index movement has been relatively flat over recent years, the latest decline was driven largely by a 25.5 per cent fall in the share price of one major listed company. This shows the vulnerability posed by a market dominated by a few counters.
Trading activity on the exchange showed mixed signals. Equity turnover surged to E31.7 million in June 2025 from just E0.6 million a year earlier.
However, the central bank warns that this increase masks the underlying challenge of sporadic trading activity, thin liquidity and the dominance of a narrow investor base. Limited foreign participation and low retail activity continue to constrain price discovery and depth.
The dominance of a small number of counters creates systemic vulnerabilities. When a single firm’s share price declines sharply, it can drag the entire market with it, as evidenced by the latest All-Share Index movement.
Concentration also dampens incentives for new firms to list, as smaller corporates may perceive the exchange as insufficiently liquid or unattractive for capital-raising.
Furthermore, concentration heightens the risk of systemic spillovers. If a dominant firm faces operational or financial stress, the impact on market capitalisation could be substantial, potentially eroding investor confidence and undermining market stability.
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Pension funds’ assets soar to E55.8bn
EZULWINI – Eswatini’s pension and retirement funds continue to play an increasingly influential role in the financial system, with the Financial Stability Report 2025 highlighting strong asset growth and rising systemic importance.
The sector’s total assets rose to E55.8 billion in June 2025, up from E50.1 billion the previous year – an 11.4 per cent increase.
Pension funds remain the largest single component of the financial sector, accounting for 34.4 per cent of total financial assets and 57.1 per cent of GDP.
This positions the sector as a major channel for long-term financing and a significant pillar of macro-financial stability.
Pension funds maintain a geographically diversified investment portfolio. About 40 per cent of assets are invested domestically, with 44.5 per cent allocated to the Common Monetary Area and the remaining 15.5 per cent invested offshore.
Foreign investments as a whole account for just over 52 per cent of total pension assets, reflecting a strategy geared towards diversification and return optimisation.
Domestically, pension funds continue to hold a mix of assets, including debt securities, equities, collective investment schemes and property.
Debt securities account for the largest share of local investments, highlighting the sector’s role in financing both government and corporate activities. Equities and collective investment schemes also form meaningful portions of the domestic asset base, though their shares fluctuate with market dynamics and rebalancing decisions.
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Pension funds potential stabilisers of exchange
EZULWINI – Institutional investors, particularly pension funds, are recognised as potential stabilisers for the exchange.
Although their participation in domestic equities has increased marginally, pension funds still favour government bonds and regional investments, resulting in limited direct influence on domestic equity liquidity. The report suggests that, subject to prudent governance and risk controls, encouraging pension funds to allocate more resources to domestic equities could support market depth and improve liquidity. However, this must be balanced against the fiduciary duty to safeguard member contributions.
The Financial Stability Report identifies several risks that could hamper the ESE’s development, including weak liquidity, limited investor participation and sensitivity to global market conditions.
*Full article available in our publication
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