Securities exchange market registers Shs10 billion drop

What you need to know:

Interests. The fall was as a result of low demand during the second quarter of the year caused by high interest charged on government securities.


The decline in equity prices at most counters saw Uganda Securities Exchange’s (USE) total market turnover falling by Shs10.8b in the second quarter of the year, a development which has hurt both the institutional and retail investors.

Statistics by USE reveal that the market realised a total turnover of Shs41.5 billion from a volume of 305.6 million shares that were traded during the second quarter of the year compared to Shs52.3 billion realised from more than 202 million shares traded in the second quarter of 2015.

The USE chief executive officer, Mr Paul Bwiso, told Daily Monitor in an interview last Thursday that the decline was due to a fall in prices of shares as a result of low demand.

“The lack of demand during the second quarter was caused by the issue of high interest charged on government securities; treasury bills and bonds. This development saw the investors shifting their investment from equities to government securities where they were getting higher returns and it was risk free investment to the investors,” he said.

Currently, there are 16 companies listed on USE with eight being locally listed and the rest being cross-listed companies of Kenyan origin.

In an earlier interview last week, the manager of Trading Uganda Securities, Mr Andrew Mwima, said there were 1,372 deals realised from the equities board, with Stanbic Bank accounting for the largest volume at 79.21 per cent while Umeme had the largest contribution to the overall turnover accounting for 78 per cent of the total.

He said Stanbic Bank, British American Tobacco (BATU) and DFCU contributed 13.34 per cent, 6.37 per cent and 2.37 per cent, respectively, adding that there was no activity registered on the corporate bond market.

The decline in equities prices also saw index movement at USE dropping significantly. Mr Mwima said the All Share Index opened at 1802.52 at the beginning of April and dropped for most of the month to 1784.61.

“The trend was negative for most of the quarter which saw the index dropping to 1768.37 in May before closing at 1706.81 at the end of June an overall return of -5.31 per cent,” he said. Concerning the Local Share Index, Mr Mwima said the local share index opened at 414.43 at the beginning of April and also dropped for most of the month closing at 389.54, adding that the index tried to rebound to 392.59 in May and 397.34 in early June before closing at 387.25 at the end of the quarter an overall return of 6.56 per cent.

Mr Mwima said the only counter that registered gains was East African Breweries Limited and BATU.

“National Insurance Corporation and Uganda Clays Limited didn’t register any changes in their prices while the rest of the counters registered declines,” he said.

“Stanbic, KCB, Jubilee Holdings Limited (JHL) and Nation Media group (NMG) had some of the largest market capitalisations at the USE, the declines in their prices negatively impacted the indexes whose movements depend greatly on market capitalisation,” Mr Mwima said.

On June 30, Stanbic market capitalisation was Shs1,343.70 trillion, KCB market capitalisation was Shs3.391trillion) JHL’s market capitalisation was Shs917.58 billion and the NMG market capitalisation was Shs952.23 billion.

Last week, the chief executive officer of African Alliance Uganda Limited, Mr Kenneth Kitariko said: “Key drivers for decline are illiquidity on all counters and tail end cautiousness related to electioneering.”

About the counters that registered decline in prices, Mr Andrew Mwima said UCHM had the largest decline in price of 44.71 per cent; Kenya Commercial Bank at 17.74 per cent and Stanbic at 10.34 per cent registered some of the other largest declines in price which had a negative impact on the indexes.