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New rules have also led to increase in liquidity
Kampala- The change in trade rules has seen Uganda Securities Exchange (USE) register increased market capitalisation to Shs26 trillion.
Market capitalisation refers to the total market value of all of a company’s outstanding shares.
Before the implementation of the new trading rules, USE’s market capitalisation was Shs23.5 trillion in July 2014.
On August 11, USE implemented the new trading rule which allows shares prices to fall or to increase by one shilling instead of five shillings to bring about improved liquidity in the stock market.
Trade manager of USE Andrew Mwima told Daily Monitor in an interview recently that the increase in market capitalisation is partly supported by the large market activity on counters like Stanbic, Umeme and Bank of Baroda; which allowed investors to transact at favourable prices that were not attainable using the previous five shilling spread.
“This has seen most stock prices register appreciations and a resultant increase in the market capitalization that now stands at Shs26 trillion,” he said.
Looking at the general impact of the new trading system since its implementation, Mr Mwima explained that there has been a general increase in market activity reflected by the unlocking of several counters that had stagnated at certain predictable prices. The market has also seen an increase in its liquidity reflected by the relative increase in trade volumes at prices that were not attainable using the previous 5 shilling spread.
“There has been reduced volatility in stock prices and the equity indexes which has helped reduce the risk that existed in portfolios of most fund managers and individual investors,” Mr Mwima said.
Mr Mwima added: “Liquidity levels have improved; globally, markets with low dealing spreads have the largest liquidity compared to markets with large spreads and we expect the rule to have a similar impact over time. Perhaps, we may someday see spreads and price quotes in decimals.”