Regional bourses to post stronger performances in second quarter

Projected low inflation rates will mean more money for investments. FILE 

By JOINT REPORT The EastAfrican

In Summary

• Analysts project that the region’s bourses will benefit from relatively low inflation rates, which should leave consumers with more money to invest.
• Several initiatives are anticipated to boost the bourses’ performances.

Regional bourses are expected to post stronger performances in the second quarter of 2014 than they did in the first quarter, capping what has been a rewarding period for investors across the region. 

Most firms have doled out increased dividend payouts on the back of better financial results for 2013 and the first quarter of 2014.

Stocks are expected to perform well in the coming months due to projected stable inflation and initiatives introduced by the Uganda, Rwanda, Tanzania and Kenya bourses.

Analysts project that the region’s bourses will benefit from relatively low inflation rates, which should leave consumers with more money to invest.

Steady foreign interests in regional stockmarkets is expected to see indices rise significantly this year, alongside the turnover.

READ: Regional investors go slow on stocks as market indices hit new highs

By last week, turnover at the Rwanda Stock Exchange (RSE) had risen 28-fold to Rwf222.5 million ($322.021) from Rwf7,878,200 ($11,400) in March, riding on huge volumes of shares traded on Bank of Kigali (BoK) and Bralirwa counters.

In Tanzania, banking, investment and manufacturing companies continue to perform strongly attracting more long-term investors with the aim of making huge profits. The Dar es Salaam Securities Exchange (DSE) index last week reached 2023.9 points, compared with 1958.09 in March.

A number of stocks at the Uganda Securities Exchange (USE) are forecast to remain flat in the second half of 2014, with many investors apparently jittery about interim earnings while anticipated increases in government borrowing are likely to pile more pressure on interest rates earned on treasury bonds.

This trend could mirror similar patterns witnessed at the local bourse since the beginning of the year, with many stocks posting little or no gains while a few blue chip shares have accounted for sharp gains in the All Share Index (ALSI) and Local Stock Index (LSI).

Data obtained from the USE shows that the ALSI opened at 1,522.46 points in January; it hit a high of 1,571.16 later that month but fell to 1,420.16 in early February. It closed at 1,503 points at the end of March.

“Conclusion of the dividend season between April and May usually leads to modest performance in share prices after June. We expect accelerated economic recovery during the last quarter of 2014 and this in turn will encourage some investors to take up fresh positions on various counters so as to profit from a rebounding economy,” said Arthur Nsiko, stockbroker and research analyst at African Alliance Uganda.

“This will spur upward movements in share prices but the impact of rising interest rates on treasury bonds seems mixed, with some investors more determined to wait out the difficult economic spell,” he added.

At the Nairobi Securities Exchange (NSE), banking stocks continue to drive activity, riding on improved profitability that saw Equity, KCB Group, StanChart and Co-operative Bank post improved 2013 earnings.

READ: High volumes and prices raise value of NSE shares

 The second quarter will remain strong, pushed by the performances of banks and companies, which will keep the indices and volumes afloat,” said Kamau Kuria an analyst at Kestrel Capital.

The RSE Local Share Index, which tracks the bourse’s two local stocks, has fallen to 258.52 from 263.05 in the first quarter.

Analysts at the Kigali bourse said the slump is blamed on the drop in BoK share price, which was trading at Rwf312 ($0.45) last week from Rwf329 ($0.47) in March. Bralirwa shares held up to trade at Rwf875 ($1.3), as at the close of March.

The Uganda All Share Index rose to 1562.15 points last week while turnover rose to Ushs1.8 million ($699) riding on 6,225,476 shares traded.

Several initiatives are anticipated to boost the bourses’ performances, analysts said. Uganda for example plans to lower the settlement period by end of May, which will allow stocks to rise or fall in multiples of one shilling as opposed to the five-shilling multiple under the current rule. This is expected to increase trading activity of highly priced stocks and help boost price discovery.

The anticipated listing of a natural gas exploration company on the DSE in June is likely to stir up business at the Dar bourse despite investors’ preference for profitable bonds to stocks.

By Scola Kamau, Benard Busuulwa and Erick Kabendera