Kampala.
Uncertainty surrounding Umeme’s power distribution agreement and
foreign-investor flight hurt trading turnover on the Uganda Securities
Exchange in 2018, while market players struggled with cost-cutting
pressures and lower revenue forecasts, according to available data.
Data compiled by stockbrokerage firm Crested Capital shows that total USE turnover dropped to Shs43.64b ($11.7m) in 2018, from Shs96.17b ($25.8m) in 2017, signaling difficult times for market players who earn commissions from stock trading.
Some trading sessions recorded turnover levels below Shs500,000 ($134), even going to zero on some trading day, USE data shows.
Gross market commissions stood at 2.1 per cent of the value of each trade. Stockbrokers earned 1.7 per cent, while USE and Capital Markets Authority earned 0.14 per cent each.
The Investor Compensation Fund earns a commission of 0.02 per cent from each stock trade, while the Central Depository System Transaction levy stands at 0.08 per cent.
The Guarantee Fund earns a commission of 0.02 per cent from each stock trade.
“Many stockbrokers are bound to register lower profits in 2018 compared with 2017 as a result of lower trading volumes,” Mr Simon Mwebaze, the general manager at UAP-Old Mutual Financial Services, said.
“For example, profit before tax posted by our stockbrokerage unit fell to roughly Shs35.4m ($9,500) at the end of 2018, from Shs101m ($27,105).”
Trading volumes declined to 584.93m shares in 2018 from 680.22m in 2017.
The All Share Index fell to 1,649.39 points from 1,962.39 points during the same period.
However, market capitalisation increased to Shs27.7 trillion ($7.4b) in 2018, from an average of Shs22.5 trillion ($6.04b) in 2017.
Equally, the US Federal Reserve’s decision to raise policy rates prompted some foreign investors to liquidate their assets in emerging markets for fear of incurring high borrowing costs.
These factors led to massive sell-offs among listed companies, dull trading activity in the last six months of 2018, falling share prices and a slight depreciation of the shilling, analysts said.
The Umeme counter accounted for 51.3 per cent of total market turnover last year, but contributed 10.13 per cent to overall trading volumes on the USE.
Data compiled by stockbrokerage firm Crested Capital shows that total USE turnover dropped to Shs43.64b ($11.7m) in 2018, from Shs96.17b ($25.8m) in 2017, signaling difficult times for market players who earn commissions from stock trading.
Some trading sessions recorded turnover levels below Shs500,000 ($134), even going to zero on some trading day, USE data shows.
Gross market commissions stood at 2.1 per cent of the value of each trade. Stockbrokers earned 1.7 per cent, while USE and Capital Markets Authority earned 0.14 per cent each.
The Investor Compensation Fund earns a commission of 0.02 per cent from each stock trade, while the Central Depository System Transaction levy stands at 0.08 per cent.
The Guarantee Fund earns a commission of 0.02 per cent from each stock trade.
“Many stockbrokers are bound to register lower profits in 2018 compared with 2017 as a result of lower trading volumes,” Mr Simon Mwebaze, the general manager at UAP-Old Mutual Financial Services, said.
“For example, profit before tax posted by our stockbrokerage unit fell to roughly Shs35.4m ($9,500) at the end of 2018, from Shs101m ($27,105).”
Trading volumes declined to 584.93m shares in 2018 from 680.22m in 2017.
The All Share Index fell to 1,649.39 points from 1,962.39 points during the same period.
However, market capitalisation increased to Shs27.7 trillion ($7.4b) in 2018, from an average of Shs22.5 trillion ($6.04b) in 2017.
Equally, the US Federal Reserve’s decision to raise policy rates prompted some foreign investors to liquidate their assets in emerging markets for fear of incurring high borrowing costs.
These factors led to massive sell-offs among listed companies, dull trading activity in the last six months of 2018, falling share prices and a slight depreciation of the shilling, analysts said.
The Umeme counter accounted for 51.3 per cent of total market turnover last year, but contributed 10.13 per cent to overall trading volumes on the USE.
Brighter 2019
However, the Uganda’s Capital Markets Authority chief executive Keith Kalyegira foresees a brighter 2019 for the USE.
“While uncertainty related to Umeme’s concession affected stockmarket trading activity last year, latest signs of weakness of the US dollar on the international currency market are likely to entice large foreign investors to explore emerging markets again,” said Mr Kalyegira.
“An improvement in the USE’s banking stocks later in the year may raise optimism about economic recovery and lure more institutional investors back to the stock market.”
“While uncertainty related to Umeme’s concession affected stockmarket trading activity last year, latest signs of weakness of the US dollar on the international currency market are likely to entice large foreign investors to explore emerging markets again,” said Mr Kalyegira.
“An improvement in the USE’s banking stocks later in the year may raise optimism about economic recovery and lure more institutional investors back to the stock market.”
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