Trading on the Uganda Securities Exchange (USE) have hit an all-time low recording a paltry Ush1.89 million ($504) in Thursday’s trading from only 10,700 shares.
Thursday’s trading represented a minimal improvement from Wednesday’s Ush1.2 million ($320) in a situation exacerbated by the coronavirus pandemic that sent global markets into turmoil.
The trades value plunged 60.7 per cent in February as investors cut back buying shares in listed companies.
Stockbrokers say risk averse investors have developed a wait-and-see attitude towards investing in stocks of listed companies which report reduced earnings and the growing risks of the coronavirus have been cited for the sharp drop.
“The growing global anxiety surrounding the spread of the coronavirus extended to East Africa with a sell-off across all the cross-listed companies most of them erasing previous month gains,” according to Crested Capital, a Kampala-based investment advisory firm.
But the USE chief executive Paul Bwiso is betting on Uganda’s buoyant economy, the blue chip stocks and Umeme, a power distribution company, securing a concession from government to drive activity on USE.
“The outlook of the market is positive,” Bwiso told The EastAfrican at USE trading floor in Nakawa adding that the expected tax cuts on revenues generated from securities is set to drive activities on the bourse.
Capital market players complain that tax on transaction increase cost of capital, reduce market liquidity and bring down securities values.
The tax incentive come at a time the Uganda government is under pressure to mobilise savings to finance its development agenda, at a time of declining aid inflows, and growing dependence on foreign currency borrowing.
Already, public securities are benefiting from tax incentives. In the last financial year, the Finance minister reduced tax rate on government securities whose maturity period is at least 10 years from 20 per cent to 10 per cent. This is to encourage acquiring and holding government securities for longer periods.
While Umeme remains a blue chip firm, its stock fortunes dropped in February. According to trading data, the utility company’s turnover for the month reduced from Ush10.86 billion ($2.93 million) in January 2020 to Ush0.97 billion ($02.26 million) in February.
Bank stocks dominated trading with 82.21 per cent of overall turnover compared with 22.23 per cent in January.
DFCU group traded Ush2.40 billion ($0.65 million) making up 43.77 per cent of turnover, Stanbic Holdings followed with Ush2.08 billion ($0.57 million) contributing 37.90 per cent while the third listed bank, Bank of Baroda, traded Ush30.14 million ($8,213) in the period.
Stanbic Uganda’s largest bank by assets fortunes on stock market dropped as retail investors became disgruntled over its low dividend policy.