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East Africa stockmarkets’ half-year results show mixed fortunes

Monday July 02 2018
brokers

Stockbrokers at the Nairobi Securities Exchange trading floor. East African bourses recorded low activity during the six months to June as foreign investors capitalised on high US dollar returns to sell off their shares at a profit. FILE PHOTO | NATION

By JAMES ANYANZWA

East African stockmarkets recorded low activity during the six months to June as local investors shifted money into risk-free government bonds while foreign investors capitalised on high US dollar returns to sell off their shares at a profit.

Analysts at the African focused research firm StratLink Ltd said the bear run on the Nairobi Securities Exchange, which started in April and gained momentum in May was largely driven by investors’ appetite for stable and attractive returns on government bonds.

There were also plenty of foreign investors selling off their stocks to make more dollars to take advantage of the Kenya shilling’s two per cent appreciation.

“Returns for dollar investors have been boosted by the appreciation of the shilling in the year to-date, encouraging the net sale of their holdings,” states StratLink’s report for June released last week.

The Kenya shilling has gained two per cent against the dollar in the past six months, reaching a high of Ksh100.94 against the greenback last week on June 27, 2018 from a low of Ksh103.35 on January 2, 2018.

This means that foreign investors who sold their shares in local currency during this period earned more in dollars.

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According to StratLink, foreign investors sold shares in firms listed on the NSE and those cross-listed at the Ugandan and Tanzanian bourses such as KCB, Equity Bank, Kenya Airways, Jubilee Holdings and Centum Investments.

Subscription rates

In Kenya, the demand for Treasury bills also remained high in May with subscription rates on government paper increasing from 136.8 per cent on May 3, 2018 to 184.2 per cent on May 24, 2018.

In the latest 15-year Treasury bond issue where the Kenyan government aimed to raise $393.8 million, the subscription rate was at 50.4 per cent indicating investor preference for short-term papers.

In Tanzania the Dar es Salaam Stock Exchange All Share Index closed the month of May 5.6 per cent lower at 2,317.8 points, in the wake of a fall in share prices for both cross-listed and locally listed companies.

The DSE started the year on a buoyant note with the bullish run witnessed in 2017 being extended to 2018 although at a slower pace due to a slow pickup of investor activity in January.

The Ugandan Securities Exchange started the year on a positive note with the All Share index inching up in January relative to the previous month as well as rising steeply relative to January 2017.

However, the bourse saw a steep drop of 5 per cent in May largely due to a fall in share prices of Kenyan firms that are cross-listed in Uganda.

Offloading shares

The selling of the cross-listed stocks was driven by profit-taking by foreign investors looking to take advantage of the appreciation of the Kenyan shilling.

The USE is gearing up for two initial public offerings following the news that Kampala-based drugmaker CIPLA-Quality Chemicals Industries is planning to list on the USE in the next four months while telecommunications giant MTN Uganda is considering offloading part of its shares to the public.

The USE All Share Index grew seven per cent to 2,111.37 on June 26, from 1,977.67 on January 2, 2018.

In Kigali, the Rwanda Stock Exchange All Share Index started the year on a slow note, shedding 0.3 per cent to close January at 133.1 as investors showed interest in high-yielding fixed income securities.

Rwanda has been issuing bonds to develop its capital market as well as fund infrastructure projects in order to reduce dependence on foreign budgetary assistance.

As a result the government is back on the market with a 10-year Treasury bond valued at $11.7 billion to fund infrastructure projects.

The bourse’s All Share Sndex declined 1.4 per cent to 131.61 on June 26 from 133.48 on January 2, 2018.

The Bank of Kigali, meanwhile, is set to crosslist on the Kenyan bourse following approval by the shareholders.

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