After suffering from a drastic decline in market activities in 2009, the Uganda Securities Exchange bounced back on a strong note out performing all stock exchanges in Sub-Saharan Africa last year in terms of All Share Index.
The Chief Executive Officer of USE, Mr Joseph Kitamirike, told Business Power that Uganda’s All Share Index (ALSI) went up by 74 per cent between January and November 2010 compared to a similar period in 2009, which was below 50 per cent.
“Turnover is up 51.6 per cent to Shs27.6 billion from January to November 2010, compared to a similar period in 2009, when turnover stood at Shs18.2 billion. Daily average turnover is up 56.3 per cent from Shs132 million to Shs207 billion per day,” he said.
The pickup in USE’s performance is being supported by the recovery in the global financial system leading to investor confidence in the market locally and internationally.
The impressive performance of USE is also attributed to high economic growth and low inflation leading to high returns on investments and the introduction of electronic trading systems, Settlement and Clearing Depository (SCD), which USE launched in the first quarter of 2010.
SCD has made trading much easier and faster than the manual trading system, which was characterised by inefficiencies and high risk.
“The SCD system is linked with an e-mail notification system that alerts the investor when there is trading activity in the respective accounts,” he said.
“A total of 4,000 out of 35,000 accounts have been demobilised. 68 per cent of these are by East African investors; 22 per cent by local investors and 10 per cent by foreign investors. Since implementation of the SCD system, over 30 million shares have been cleared through the system.”
High economic growth and high returns on investments have proven to be the driving factors leading offshore investors in frontier markets like Uganda.
Uganda’s GDP growth for 2010 is estimated at 5.8 per cent while the GDP growth rate for 2011 is projected to be 6.4 per cent.
This positive market development acts as a centre of attraction for offshore investors as they try to reduce the risk associated with investing in markets where prices can fall or rise depending on the prevailing economic condition.
The USE is now 12 years old since its establishment in 1998, however, it still remains one of the smallest stock exchanges in Africa but quite vibrant in market activities and profitability.
This year, USE witnessed the listing of the National Insurance Corporation (NIC) and the cross listing of the Nation Media Group making the number of companies listed on USE 13 with six cross listed firms.
On the debt market (Fixed Income Securities Market), the central bank is actively issuing treasury bonds on behalf of the government. The number of government bonds now stands at 33 with different maturity ranging from two, three, five and 10 years. The number of government bonds has continued to outnumber that of corporate bonds which are just five.
During the second quarter of 2010 the turnover in government securities amounted to Shs468,675,000,000 up from a turnover of Shs353,63, 000,000 recorded in the previous quarter. Unlike the corporate this saw no active during the same period.
On the future prospects of USE, Mr Kitamirike says the USE is liaising with the Central Bank of Uganda to establish a link with the Real Time Gross Settlement (RTGS) system, reviewing their capital market legal regime with a view to developing simpler laws and coming up with a distinct piece of draft legislation.
The other new initiatives being undertaken by the USE Mr Kitamirike said are that USE is working on developing a local index to capture the trading activity of domestic companies.
Mr Kitamirike disclosed that new listings are expected between the end of quarter 4 of 2010 and end of 2011 and these includes Tullow Oil and Umeme. Centum, a company listed in Kenya, is expected to cross list in quarter 1 of 2011 and Standard Chartered Bank is also set to issue a another corporate bond.
As of way of comparison, the Nairobi Stock Exchange (NSE) comes second to Uganda Securities Exchange in terms of high index in Africa as of November. The NSE’s good performance is also attributed to remarkable recovery in the financial market besides other new initiatives that has been by the stock exchange management aimed trading more fixable.
Mr Peter Mwangi, Chief Executive of Nairobi Stock Exchange (NSE) said: “Market performance for the third quarter, both for the bonds and equity markets has picked up considerably. The NSE 20 Share Index is up 23 per cent year to date (November 2010). Market capitalization is up 18.7 per cent is currently at Kshs1,169 Billion ($ 14.3 Million),”