Rwanda bond market on growth path while equities stall

Wednesday July 19 2017

Trading at Rwanda Stock Exchange (RSE). The

Trading at Rwanda Stock Exchange (RSE). The secondary market bond turnover on the Rwanda Stock Exchange surged six times in first half of this year to settle at $4.1 million (Rwf3.4 billion), from $614,143 in (Rwf514.5 million in the same period in 2016. PHOTO FILE | NMG 

By KABONA ESIARA
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The secondary market bond turnover on the Rwanda Stock Exchange surged six times in first half of this year to settle at $4.1 million (Rwf3.4 billion), from $614,143 in (Rwf514.5 million in the same period in 2016.

The half-year growth in the gross bond fund sales is three times more than the total trades from January-December 2016.

Trading on the equities market on the other hand was subdued as investors shifted to fixed-income securities in the face of uncertainties surrounding bonuses across East Africa.

Since last year, there has been a growing appetite for bonds. The trades have grown from Rwf880 million ($1 million) in 2015 to Rwf1.63 billion ($1.9 million) last year. The transactions surged 230 per cent. 

“The reason for the surge is that the equity market has performed poorly and therefore investors are switching to fixed income investments that give reasonable returns,” said Rwanda Capital Market Authority (CMA) executive director Robert Mathu.

He added: “It also means investors are beginning to embrace Treasury bonds as their asset graph for investments.”

For three straight years, the four East African Community capital markets have taken a hit, pulling down share prices of many listed companies.

In Rwanda, the dismal performance of the equity market brought down the market turnover. The bourse recorded a 46 per drop from January-June this year compared with the same period in 2016.

The trades dropped to Rwf15 billion ($18 million), compared with $33 million (Rwf28.2 billion) in January-June 2016, brought down by low liquidity of the market, which has seen shares of public listed companies shed value.

Rwanda has four domestic listed companies — Bralirwa, Crystal Telecom, I&M Bank Rwanda and Bank of Kigali — whose share prices plummeted in the first six months of trading.

Between April and June, the I&M Bank Rwanda share price fell to an average $0.112 (Rwf95), from $ 0.124 (Rwf105).

Listed brewer Bralirwa’s share price declined 23.5 per cent in the first six months of this year compared with the same period last year.

The challenge the Bralirwa counter faces is that the brewer has been reporting reduced profits as the company taps annual revenues to finance debt.

The brewers’ share, which was trading at an average of Rwf173 ($0.205) between January and June last year fell significantly averaging Rwf132 ($0.15) in 2017.

Crystal Telecom’s share price averaged Rwf81.6 (0.09) in the first six months of this year, down from Rwf87.3 in 2016.

The telecom company’s share price, which stabilised at the beginning of the year fell shortly after the Rwanda Utilities Authority Regulatory (Rura) slapped a $8.5 million (Rwf7.03 billion) fine on MTN Rwanda for hosting data services outside the country in breach of its licence.

Analysts expect the fine to impact negatively on MTN Rwanda in its end year financial statement as it is expected the company will tap into its revenues to pay the fine.
MTN Rwanda is 80 per cent owned by the MTN Group while the remaining 20 per cent is listed on the Rwanda Securities Exchange through a special purpose vehicle, Crystal Telecom.

“The fine always has a cash flow impact given the fact that the whole amount has to be paid at one,” said MTN Rwanda chief finance officer Diatile Lilly Zondo.

This is likely to reduce the dividend payouts to the shareholders.

The share price of Bank of Kigali, the market leader by assets and profits also took a hit , shedding 13.7 per cent of its value in the first six months of this year compared with the same period last year.

The bank’s share price dropped from Rwf280 ($0.33) in the first six months of last year to trade at an average of Rwf241.5 ($0.28) this year.