Cross-listed counters register price drops

Although Uganda Securities Exchange (USE) realised an equity turnover of Shs187.3 billion, from a volume of 890 million shares in 2015, cross-listed stocks from the Nairobi Securities Exchange recorded huge drops in their share prices

Tuesday March 8 2016

Securities exchange

Stock brokers monitor trading activity at the Uganda Securities Exchange. File photo  

By Martin Luther Oketch

Although Uganda Securities Exchange (USE) realised an equity turnover of Shs187.3 billion, from a volume of 890 million shares in 2015, cross-listed stocks from the Nairobi Securities Exchange recorded huge drops in their share prices.
Of the 16 listed companies on USE, eight are locally listed while the rest are cross-listed companies mainly from Kenya.
Trade manager USE Andrew Mwima explained that the negative performance of the all share Index was greatly attributed to the cross-listed stocks from the Nairobi Securities Exchange that saw most of them record huge drops in their share prices.

The stock price of KCB dropped by 24.14 per cent, Equity bank dropped by 15.2 per cent, CENTUM 17.62 per cent, NMG dropped by 21.52 per cent while East African Breweries dropped by 4.56 per cent.
“Most of these stocks contribute heavily to the market capitalisation of the Uganda Securities Exchange which declined to 24.1 trillion at the end of the year from 26 trillion at the beginning of the year,” he said.

The performance in the stock market is determined by how the All Share Index behaves. In the stock market language All Share Index is a series of numbers which shows the changing average value of the share prices of all companies on a stock exchange, and which is used as a measure of how well a market is performing.

All Share Index performance
Speaking on the performance of USE Index Performance, Mwima said: “The All share index opened at 1,905.85 at the beginning of the year, it touched a high of 2,076.39 and started a descent that saw it drop to 1,995.63 in June, 1,822.2 in October and closing at 1,763.75 on 31st December an overall drop of 7.46 per cent.”
Regarding the Local Share Index, he said it opened at 318.63 at the beginning of the year, rose steadily to 329.19 in March, 370.73 in October before closing at 412.07 in December registering an overall gain of 29.3 per cent.
“This was supported by the gains in share prices of most local companies most notably; UMEME, DFCU, BATU and Bank of Baroda (BOBU). This implies that an investor who had invested in the local stocks registered an average return on investment of 29.3 per cent on capital gains alone without taking dividends into account,” he said.

Mwima added: “Both Indexes; the All share and Local share index performed relatively well compared to the world stock market bench marks most notably the Morgan Stanley Capital Index (MSCI) series that track performances of stock markets world over.”

Progress from largest counters
Trading activity in the largest counters of Umeme and Stanbic bank enabled USE to register progress in 2015 despite limited corporate activity.
Most of last year, Stanbic which garnered the largest capitalisation of Shs1.5 trillion traded between Shs32 and Shs33.
Umeme which trails Stanbic, registered market capitalisation of Shs1.05 trillion, trading at Shs650.
Mwima in an interview with Prosper magazine last week said activity on the equity segment was dominated by activity from Umeme and Stabic accounting for more than 80 per cent of the total turnover.

USE explains that although there were relatively no corporate actions such like new listing by companies, bonus issue or right issue by the already listed companies in the stock exchange during 2015, the equity market performed relatively well. This saw investors making profits out of their investments in the stock market especially in the active counters.
“The only cross-listed counter that traded was Centum. Trading activity was dominated by the local counters accounting for over 99 per cent of the total turnover and volume,” he said.

Comparing development in Uganda and those in the other stock markets from around the world, Mwima said the MSCI Frontier markets which tracks performances of markets clustered as frontier (smaller than emerging markets), registered a return of -16.55 per cent while the MSCI ACWI + Frontier markets (all country world index) that aggregates all stock markets in the world registered a return of -6.32 per cent.
MSCI is a US-based provider of equity, fixed income, and hedge fund stock market indexes, and equity portfolio analysis tools.

MSCI ACWI Indexes offer a modern, seamless, and fully integrated approach to measuring the full equity opportunity set with no gaps or overlaps. MSCI ACWI captures large and mid-cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries with 2,490 constituents, the index covers approximately 85 per cent of the global investable equity opportunity set.

Summing the development in the stock markets on the international scene, Mwima said: “The dismal performance of the world markets was mainly due to the debt crisis that happened in Greece in the first quarter of the year, the drop in oil prices on the world markets and the slowdown in the Chinese economy.”
Uganda Securities Exchange trades both equities and the corporate bond in the secondary market. However, the fixed income market of USE is not as vibrant as the equity market.

Currently, there are six corporate bonds listed on USE. Unlike in the past year, in a rear a development compared to years back this time around the fixed income market in the corporate world registered remarkable activity in 2015.
Mwima said the turnover realized from the fixed income segment was 13.6 billion from a volume of 129 million corporate bond units. “The total turnover realized on the market was 200.9 billion,” he said.

Research analyst at African Alliance Uganda Limited, Arthur Nsiko told Prosper magazine in an interview that they received a lot of interest from foreigners at the Umeme counter.
“These were foreigners mostly from UK and South Africa. Stanbic Bank Uganda counter was also equally active in 2015,” he said.

Limited activity
Market activity in USE over the years shows there is limited activity in the fixed income market segment mainly the corporate bond.
Research analyst at African Alliance Uganda Limited, Arthur Nsiko attributed the dull activity in the fixed income segment at USE to most activities of the corporate bonds taking place at the primary market. After the investors have bought them in the primary market due to high interest rate charged on them, most investors to tend hold onto them to maturity.
“This investor behaviour has always led to low activities in the corporate bond in the secondary market at USE,” he said.

Globally, the stock market in the first two months of the year 2016 has been characterised by slowdown attributed several factors notably the slowdown in the Chinese economy and the continued decline in the global oil prices.
In Uganda, giving his view on how the stock market will perform this year, Nsiko said in the first quarter activity was high in January but slowdown in February due to elections.

“The factor which could affect the stock market performance this year is the high yields on treasuries bills and bonds. The high interest rates charged in the treasuries might affect the performance of the equity market this year because investors prefer to invest in treasury bills bill and bonds where they rates are (yields) are profitable,” he said.


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