Where Ugandan investors made and lost money in 2024

We are all pawns dreaming of becoming queens and kings, but only those who master the moves win the crown.

Now, speaking of winners, we took a peek at the scoreboard, and guess where the cash-loaded investors are striking it big? Right here on home turf - the Uganda Securities Exchange (USE).

Equities 

Investors looking for a sweet spot in financial markets last year didn’t have to search far - it was right here on the local exchange.

Sure, you could point to other investment vehicles like real estate, government securities, dollar accounts, unit trusts, or fixed deposits, but let’s face it; their 2024 returns couldn’t hold a candle compared to equities.

To be fair, let’s shine a spotlight on the stock market’s black diamonds - the shining stars that Crested Capital, a brokerage firm, deemed the biggest winners.

MTN, Bank of Baroda, Quality Chemical Industries formerly Cipla, Umeme, and Stanbic Bank, were the crown winners in 2024.

If your portfolio featured on these stocks, you were in for some serious bragging rights.

MTN (Shs20.5) and Umeme (Shs104.20) led the dividend party, while equity prices for Quality Chemical Industries, Bank of Baroda, and MTN soared by 39.05 percent, 48.33 percent and 57.39 percent, respectively. 

All these equities delivered returns exceeding 25 percent - on paper, at least.

However, here is the catch: Those gains only count if you cashed out. In the stock market, potential profits remain a mirage until you sell.

When combining one-year share price gains and dividend yields, MTN emerged as the MVP with a total return of 64.84 percent, followed by Bank of Baroda (57.32 percent), Quality Chemical Industries (46.86 percent), Stanbic (36.83 percent) and Umeme (28.86 percent).

“2024 was a strong year for these counters,” says David Bateme, a research analyst at Crested Capital.

“Quality Chemical Industries revived and even boosted its dividends, Umeme attracted speculation due to government buyout and exit price, Stanbic offered solid financial performance and double dividends, Bank of Baroda impressed with strong financials, and MTN delighted investors with generous pay-outs, with whispers of a potential special dividend tied to the mobile money split,” he says.

Despite the success, not all stocks were equal.

Quality Chemical Industries, for instance, struggles to be mentioned alongside MTN or Stanbic.

Its initial public offering price of Shs256.5 per share has plummeted to Shs75 as of last Wednesday.

“Investors who bought during the initial public offering are still nursing losses,” says Alex Kakande, a financial analyst.

“Stanbic’s stock has risen consistently over three years, though liquidity is a challenge - everyone wants to buy, but no one’s selling. Meanwhile, MTN is trading above its IPO price, and Bank of Baroda continues to woo investors with strong financials,” he says.

But where else did the investors earn or lose money?

Bond market

The fixed-income market, led by government securities, offers stability - but don't expect returns beyond the coupon rates or secondary market yields, which averaged 15 percent last year.

Digging into data from banks and the central bank, long-term bonds stole the spotlight, with yields ranging from 15 percent to 16 percent, driving the overall average.

Short-term bonds, on the other hand, delivered modest yields, oscillating between 13 percent and 14 percent. Stability, yes; surprises, no.

Unit trusts

Last year proved fruitful for fund managers, particularly those handling unit trusts, or collective investment schemes, with returns to investors ranging between 10 percent and 13 percent, even on an annualised basis.

Fund managers, including Xeno Technologies, credited these gains to favourable returns across equities, government securities, and money markets.

The combination of coupon payments, yields, and price movements worked in their favour.

A key factor driving this success was inflation, which dropped to 3.3 percent from 2023’s 5.4 percent, according to the Uganda Bureau of Statistics.

With lower inflation, investor returns were less eroded, allowing real gains to shine through.

Yet, the story wasn’t without drama. The government’s cash crunch gave investors the leverage to demand higher premiums, which nudged returns even higher.

“Investor returns didn’t adjust down despite inflation falling to single digits,” says Aeko Ongodia, founder of Xeno Technologies.

“Macroeconomic indicators, including inflation, improved significantly. However, yields on benchmark instruments remained elevated, likely due to limited money in circulation,” he says.

A rare alignment of factors ensured that fund managers - and investors - ended the year with a smile.

Fixed deposits

The fixed deposit rates were generally higher during 2024, rising to an average of 11.99 percent from 10.52 percent, reflecting the elevated appetite for financial institutions to pay up a bit more for term deposits.

The rising trend was in tandem with the shift in rates on government securities that was informed by a combination of factors that included increased government borrowing from the domestic market, low government releases, elevated cash reserve requirements for financial institutions, and increased auction sizes.

“Whereas these factors helped Bank of Uganda to manage inflationary pressures that also saw the central bank rate (CRB) increase from 9.5 percent at the start of the year to 9.75 percent by December, they inherently served to crowd out liquidity from the financial sector and tightness in liquidity, therefore higher interest rates on money market instruments,” says Richard Nsubuga, the Absa Bank trader CIB markets.

“Overall, investors with surplus [shillings] were generally better off considering the higher [shilling] interest rate environment during the year,” he adds.

Dollar deposits 

For investors who parked their money in dollars at the start of 2024, the question is whether they profited when cashing out in December.

The shilling showed surprising resilience in 2024, starting the year at Shs3,775 and initially losing ground, ending January at Shs3,818, before sliding further to Shs3,876 by mid-February, data from the Bank of Uganda, shows.

The depreciation was largely driven by corporate demand and ongoing fiscal concerns, particularly following World Bank’s halt of new funding due to the Anti-Homosexuality Act.

This uncertainty triggered sell-offs in domestic bonds and a surge in dollar demand, Nsubuga says, and by the end of February, the shilling had hit an all-time low of Shs3,950, as offshore investors sought better yield in regional markets, particularly Kenya, which issued an attractive infrastructure bond.

However, the shilling recovered when Bank of Uganda intervened by raising the central bank rate - from 9.5 percent to 10.25 percent - which helped stabilise liquidity and ease pressure on the unit through March and April.

It rebounded to trade between Shs3,807 and Shs3,760, data from Absa shows.

As the year progressed, the local currency remained stable, supported by a strong coffee harvest and consistent dollar inflows. The exchange rate hovered between Shs3,670 and Shs3,750, with corporate demand remaining subdued.

“This stability allowed the shilling to maintain a firm position against the dollar for much of the year. The shilling only slipped in November, trading above Shs3,700, following US elections, where what some called a ‘Trump trade’ sparked global dollar demand in anticipation of potential policy shifts. However, it bounced back, trading between Shs3,640 and Shs3,680 by mid-December, supported by inward remittances and ongoing commodity flows,” Nsubuga says.

Overall, the shilling appreciated by about 3.5 percent throughout the year. For those who held investments in dollar-denominated assets, this means they likely saw better returns globally as the dollar remained strong, reflecting higher rates and market volatility.

Real estate

When other investments feel risky or complex, real estate often becomes the go-to refuge.

Yet, in Uganda, this "safe bet" can sometimes defy logic - a 50 by 100 plot priced at Shs1b in a country where the average monthly salary hovers around Shs200,000, according to data from Bank of Uganda and Uganda Bureau of Statistics - is a puzzle in itself that will take long to solve.

Last year painted a grim picture for the sector. According to the Association of Real Estate Agents Uganda (AREA), 2024 was a buyer's market.

Supply outstripped demand, forcing property prices to move southwards.

"Its basic economics," says AREA’s Lazarus Mugabi, "Too much supply, too few buyers."

Real estate offers potential returns but demands patience and hefty upfront investments.

Unlike bonds or fixed deposits, which deliver predictable interest, real estate returns hinge on market demand, property appreciation, and rental occupancy - all prone to fluctuation.

If property prices stagnate or tenants remain elusive, you are left holding a slow-moving asset.

Still, there are success stories. "You could have earned a 22 percent return in just a year," Mugabi says.

The trick, however, is smart investments - buying land in high-demand areas, subdividing it into affordable plots, or building condominiums, whose current occupancy rates are robust.

"Quick returns of 10-22 percent are possible if you play your cards right," Mugabi says but cautions against diving in blindly.

"Without thorough market, macroeconomic, and commercial research, you risk costly missteps in pricing and investment."

What to expect this year?

Predicting this year’s market is like forecasting a Kampala downpour - tricky at best.

“It’s hard to say,” admits Ongodia. Reason? An election year is just here, and with elections come surging government spending as politicians scramble for votes.

While this vote-hunting spree delights politicians, it dents the country’s macroeconomic health.

Inflation inevitably rises, eroding the purchasing power of any gains investors might make in financial or capital markets.

Inflation is an investor’s kryptonite, often triggering capital flight as they move funds to safer markets until the storm settles. The script is familiar. Take Kenya, for instance. In early 2024, 20 foreign institutional investors fled the Nairobi Securities Exchange, a bearish wave that wiped Shs938.8b (Ksh33b) off the Kenya’s stock market value by August.

Big names like Safaricom and BAT Kenya bore the brunt as foreign pension funds, hedge funds, and insurers panicked over fears of poor macroeconomics in Kenya and on the global market. For Uganda, last year was a strong showing for the local exchange, but history suggests lightning rarely strikes twice.

"We don’t expect a repeat this year,” says Ongodia. “If macroeconomic uncertainties spook investors, we may see exits, with a rebound only when stability returns.”

This very hiccup happened last year when Uganda faced exchange rate turbulence as offshore investors shifted toward higher-yielding assets in regional economies.

In response, Bank of Uganda took decisive action during a special Monetary Policy Committee meeting in March 2024, raising the Central Bank Rate to 10 percent.

This bold move worked wonders, stabilising the shilling and easing inflationary pressures.

By October, with inflation under control and exchange rate jitters subsiding, the Central Bank signalled its confidence in the economy by trimming the policy rate to 9.75 percent.

As of November 2024, Uganda boasted an annual headline inflation rate of just 2.9 percent - the lowest in 10 months - thanks to strong food crop production.

This progress reflects increased foreign exchange activity, which has bolstered liquidity and anchored the shilling's stability.

By November, the shilling demonstrated remarkable resilience, dipping just 0.3 percent against the dollar to an average rate of Shs3,677.55.

This stability owes much to a steady influx of foreign currency from coffee exports, remittances, foreign investments, and effective monetary policies.

In a strategic twist, Uganda announced plans to purchase gold from local artisanal and medium-to-large mining firms to build foreign exchange reserves.

The move not only diversifies Uganda's reserve base but also reduces reliance on the dollar, signalling a proactive approach to financial resilience.

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