Electronic link opens cross-border trading of shares

Umeme board chairman Patrick Bitature and Umeme MD Charles Chapman during the listing of the company’s share at the NSE last year. Photo/File 

By John Gachiri
 

 

In Summary

• The immediate benefit expected from inter-linkage of the trading systems is more convenience for investors who bought shares locally.
• The system made the first trade of Umeme possible after the going for eight months without a single trade at the Nairobi Securities Exchange.
• The Wednesday trade saw 1,000 of the utility’s shares moved on the NSE at a debut price of Sh13 each.

The electronic link between Kenya and Ugandan stock markets has gone live, opening new possibilities for investors seeking cross-border trade opportunities.

Ugandan power distributor, Umeme, recorded its first trade at the Nairobi Securities Exchange (NSE) since its cross-listing on December 14.

The Regional Inter-depository Transfer Mechanism (RITM), which links Kenya’s Central Depository and Settlement Corporation and Uganda’s Securities Central Depository, made the first trade of Umeme possible after the going for eight months without a single trade.

The Wednesday trade saw 1,000 of the utility’s shares moved on the NSE at a debut price of Sh13 each.

Despite being cross-listed on the NSE, trading of Umeme shares was only possible on the Uganda Securities Exchange (USE), which admitted the shares on November 30 through an initial public offering (IPO).

The immediate benefit expected from inter-linkage of the trading systems is more convenience for investors who bought the shares locally.

“This will benefit investors and issuers of cross listed securities such as Umeme. It gives great leverage to shareholders as they are able to decide on which exchange to trade and in which currency,” said NSE chief executive Peter Mwangi in a statement.

Umeme shares are frequently traded on the USE, and Kenya investors who purchased the stock locally should benefit from its high liquidity.

“Since the listing of Umeme shares, we have witnessed increased daily activity at the USE and Umeme is one of the most active counters,” said USE chief executive Joseph Kitamirike.

Umeme accounted for 45 per cent or 125,059 of the 277,792 shares traded on the USE in Wednesday’s trading.

Since its listing, 163,504,455 shares have traded. The closing price values Umeme at Sh21 billion making it the third highest capitalised company on the NSE’s energy and petroleum segment after KenGen (Sh35 billion) and Kenya Power (Sh27.4 billion).

“With the integration, our shareholders have a choice of where they want to trade, which will significantly increase convenience for our investors,” said Umeme managing director Charles Chapman.

The RITM will also make it possible for investors who want to unlock the value of their investment at current prices. The Sh13 trading price on Wednesday reflected a 30 per cent appreciation of Umeme shares from the Sh10 IPO offer price.

The East African Securities Exchange Association (EASEA), the umbrella body for the region’s stock exchanges, had set Monday July 29 as the deadline for the RITM to be up and running, but has pushed the date forward.

On the reverse, linkage of the two clearing houses will allow investors in Uganda to easily trade in Nation Media Group, Kenya Airways, Jubilee Holdings, East African Breweries Limited, Centum Investments and Equity Bank Limited; Kenyan stocks that are cross-listed on the USE