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Stock market: 2024 has set the stage, will 2025 fan the cash?
Many companies have seen their trading activity improve in 2024, which sets the stage for better yields next year and the years beyond. Photo / File
What you need to know:
- The stock exchange has, according to market analysts, recovered from Covid-19-related challenges in 2024, setting the right stage for bumper yields in 2025 and beyond
Imagine the stock market is like a popular street food stall. Some days, the lines are long, smells irresistible, and everyone’s talking about it. Other days, it's quiet, but you know the food is still good.
The stock market has been busy in 2024, with some standouts stealing the show and making investors hungry for more.
The stock market isn’t some VIP-only affair. Think of it as a bustling marketplace – just that instead of mangoes, you buy a part of a company or companies and own a share. You are not just a spectator; you are part of the story.
Take MTN or Stanbic, for instance. Investing in them is like placing a bet on their growth, with the prospect of sharing into that growth.
However, Calvin David Bateme, the head of research at Crested Capital, a brokerage firm, says: “Investing without knowledge is like chasing shadows.”
The Uganda Securities Exchange (USE) has grown, from just five companies in 2004 to 11 today and this year, seven out of the 11, posted gains, pushing the All Share Index up by 26.48 percent as of November 24 to 1,149.97.
However, this was slightly lower than the 2017 and 2014 performances of 28 percent and 27 percent, respectively.
2020 and 2023 were rough, with a 28 percent dip in annual returns, but 2024 has been a golden year based on cumulative data.
Crested Capital analysts Janet Anayo and Delick Manishimwe point to an economic rebound post-Covid-19 and the Russia-Ukraine war that drew investors to locally listed firms due to strong earnings, attractive dividend yields, and headline events – such as MTN’s secondary offer in June and the buzz over Umeme’s concession ending in March 2025.
As for the all-share index, most gains came from cross-listed stocks.
The bulls
During 2024, the Stanbic, Umeme and MTN counters have stolen the show, with impressive returns and rising investor interest.
Stanbic was the comeback kid, soaring from Shs21 to Shs48.72 in two years, becoming the third-largest traded counter at the Uganda Securities Exchange after MTN, due to impressive dividend payouts and the appointment of a new chief executive early this month.
The MTN counter continued to rule due to dividend payout and a mid-year share discount. On the other hand, the Bank of Baroda counter remained a little quiet but steady, boosted by generous dividend payouts, even as the company experienced a dip in earnings.
The Umeme star continued to shine in 2024, commanding 59.4 percent of total turnover (excluding MTN’s secondary offer) and rewarding investors with steady dividend payouts.
With its concession expiring next March, eyes are on the buyout cash of about $300m (pending approval) from government.
This has stirred investor speculation, driving up stock prices as investors seek to cash in on special dividends and other potential opportunities.
But the biggest gainer was Quality Chemical Industries, which held strong and delivered solid dividends, perhaps, due to the entry of a new shareholder – Africa Capitalworks - with a controlling stake.
Thus, the five companies above accounted for nearly all the action on the Uganda Securities Exchange this year, commanding 98.89 percent of total turnover.
The bears
However, some stocks struggled, with Airtel, despite a steady payout of dividends, struggling since its November 2023 listing.
The telecom has fallen short of initial public offering net profit promises, but brokers remain optimistic about a turnaround in 2025.
On the other hand, Uganda Clays skipped dividends after losses, while NIC Holdings continues to slide, with a 2022 rights issue and a promise of a capital injection, yet to be realised.
Dfcu stabilised and promises to offer a better 2025, but British American Tobacco Uganda, which continues to deliver dividends, has been kept under the radar due to a flat stock price and low yields. New Vision Limited raised capital but remains in losses, with no dividends. Will it, as it has promised, turn the corner in 2025?
Together, the stocks above made little impact, accounting for less than 2 percent of the market’s turnover this year.
Paul Bwiso, Uganda Securities Exchange chief executive officer
Strong year
Paul Bwiso, the USE chief executive officer, says 2024 has been ‘a strong year’ boosted by MTN’s secondary market offer early this year.
Excluding MTN’s offer, the market’s trading hit Shs74.3b by November 30, but the Shs220b from MTN pushed the market to Shs294.3b, a superior posting far better than 2022’s Shs36.5b.
At regional level, Rwanda was flat at 3 percent growth, while Dar es Salaam and the Nairobi Stock Exchange rose by 21 percent, and 29 percent, respectively. Locally, the USE grew by 4.7 percent, while the all-share index rose by 30 percent.
Risks
With the electioneering period in the corner, and a possible spike in inflation, market analysts and brokers are urging investors to be cautious over the next 12 to 18 months.
But beyond this is the shape of the market post-Umeme, which has created both anxiety and optimism, with stocks such as MTN, Quality Chemical Limited, and Stanbic step up to fill the anticipated the void.
The exchange could also see increased activity from the newly created commodities exchange and the possible linkage of the local exchange with other exchanges on the continent.
Crested Capital, the first commodities trader, however, says the commodities exchange could face challenges of grain standardisation and capital needs.
Liquidity problems
One thing that still puzzles listed companies is when buyers struggle to find sellers and vice versa. This, although Bwiso says stems from structural inefficiencies, creates a liquidity crisis.
This is largely because institutional investors, such as pension funds, insurers, and asset managers, which dominate the market in terms of volumes, hold onto their shares for the long-haul.
While this works for them, it stifles trading, because there are fewer retail shares, yet they are the fuel that drives market activity.
For instance, when Airtel floated shares in November last year, NSSF snapped up more than 52.75 percent of the offer.
The same happened with MTN’s secondary offer this year, where NSSF snapped up 43.3 percent.
The challenge here is that NSSF barely trades, and even when it decides to trade, it is highly unlikely that there will be willing and ready buyers to buy such volumes of shares.
The Uganda Securities Exchange has the lowest liquidity in East Africa of only $5,000 daily trading, compared to Kenya’s average of $1.5m.
“Our liquidity problem is systemic. With institutions holding assets and selling only when performance dips, there’s little incentive to trade. It’s a demand-supply imbalance, and it’s structural,” Bwiso says.
Capital Markets Authority is now working on regulations to expand products that institutions can trade to address this challenge.
