Rwanda’s equities market recovering, as investors ponder Kenya’s politics

Friday October 13 2017

Liquidity on the Rwanda Stock Exchange has been

Liquidity on the Rwanda Stock Exchange has been boosted after a slow start in 2016. PHOTO | FILE 

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Rwanda’s equities market has recovered, posting impressive turnover as investors sought opportunities in the country’s blue-chip companies in the first nine months of 2017.

Data from the Rwanda Stock Exchange (RSE) shows that the value traded on the equities market grew 40.3 per cent, buoyed by I&M Bank Rwanda’s stock and the appreciation of Bank of Kigali shares.

I&M Bank Rwanda shares started trading on March 31 this year, attracting new investors to the market, which has boosted the liquidity on the RSE after a slow start last year.

The turnover on the equities market went up by $5 million in the first nine months of this year, according to RSE data. Last year, the value traded in the first nine months was $12.4 million, but it grew to $17.4 million despite sluggish economic growth in the first quarter of this year.

Now managers of RSE are betting on the growing economy, the strong results that listed companies have posted in the first six months of this year, and government’s quarterly debt issuance, to boost activity and liquidity on the bourse’s secondary market.

The Rwanda economy rebounded in the second quarter of this year buoyed by the recovery of the agriculture industry and growth of services sectors despite slow growth in consumer spending.

The expansion of the economy has increased the country’s chances of returning to high growth rates in the next six months.

Rwanda’s GDP grew at a rate of 4 per cent in the April-June quarter, higher than the 1.7 per cent in the first quarter of this year. The target of 6.2 per cent growth average from January-December look like it will be achieved.

Rwanda’s inflation has also been subdued, the pressure on the exchange reduced, and credit to the private sector is growing.

“All the half year results we have seen have shown us a positive trend despite the sluggish growth of the economy. But the economy has recovered; it is much better now as reported by the National Institute of Statistics,” said RSE chief executive Celestin Rwabukumba.

“Investors should expect more earnings in the future as all the companies are doing well.”

External factors

Deal markers however are concerned about the political uncertainty in Kenya, the bellwether in the region, fuelled by the prolonged electoral process and the bickering of Kenya’s opposition and ruling party, which impacts negatively on investments and saving.

“Markets worldwide were down this year and demand dried up. Foreign investors lump the region together when making their investment decisions,” said David Gathaara, the managing director of Baraka Capital, a brokerage firm with offices in Kampala and Kigali.

He however cast doubt on the sustainability of the signs of recovery in Rwanda’s capital market.

“I do not expect recovery until the first quarter of next year because foreign investors are waiting to see what will happen in Kenya election,” said Mr Gathaara.

The secondary bond market trades value remained on a strong growth path in the first nine months of this year compared with the same period last year.

The Rwanda government is the biggest player on the bond market, which has maintained a quarterly issuance of securities. The only corporate bond trading on the RSE was issued by I&M Bank Rwanda.

Trading data indicates that the value of bonds traded grew from $1 million in the January-September, 2016 period, to reach $5 million in the period ending September 2017.

Crystal Telecom’s profits dropped in the half year to June after its key business MTN Rwanda settled a $8.5 million regulatory fine.