The Uganda Securities Exchange has rolled out an online trading window — Easy Portal — that offers investors opportunities for faster transactions at no fee to spur trading activity.
But a scarcity of equity listings and limited investor participation could work against the initiative.
Easy Portal directly helps investors to trade shares without hiring stockbrokers.
Stocks traded on the USE are charged a commission of 2.1 per cent that is shared between the stockbrokers, the bourse, the Capital Markets Authority and the Investor Compensation Fund, among other agencies.
To trade, investors will log in their Central Depository System account numbers, their national identification card numbers and view the prevailing stock prices before choosing trading options.
The trading window also contains an initial public offering (IPO) application, a critical aid for handling investor documents usually submitted during public equity offerings.
Investor statements issued by this facility will be saved for a maximum of six years, the bourse said. However, investment costs tied to this trading portal could not be confirmed by press time.
Low IPO growth
However, sluggish growth evidenced in IPO subscriptions in recent times could impact investor uptake on the Easy Portal window, observers say.
IPO growth usually attracts more investors to stockmarkets and in turn, boosts trading activity as new investors seek to exploit fresh opportunities available at the bourse.
The low IPO growth at the USE can be traced back to 2012. While DFCU Ltd and New Vision Ltd were listed in and also recorded oversubscription of about 50 per cent, Stanbic Bank Uganda was listed in 2007 following a successful IPO that was oversubscribed three times, according to industry data.
NIC Holdings Ltd was listed on the USE in March 2010 while Umeme Ltd made its trading debut on the local bourse in November 2012. After five years of Umeme Ltd’s listing on the local bourse, the USE has struggled to attract new IPOs with proposed transactions being cancelled by issuers while others have been put on hold.
Nevertheless, the bourse is exploring IPO opportunities among some government-owned financial institutions that possess reasonable growth forecasts.
“We have been mobilising a set of pipeline IPO deals in previous months but challenges being faced by targeted companies and some corporate governance issues have delayed implementation of this venture. For instance, some of the identified businesses have issues with filing taxes and this affects the quality of listings expected by large international investors. That is why we need patience on this matter,” said Paul Bwiso, chief executive officer at the USE.
“We are looking at development of an app that helps investors get real time trading information from both the exchange and stockbrokers plus mobile money enabled payment channels in order to attract more retail participants the stockmarket. We are also pursuing IPO opportunities related to government-owned financial players such as Post Bank Uganda and Pride Microfinance Ltd,” Mr Bwiso added.
Overall investor participation in the stockmarket remains low, which is attributed to a pool of dormant investors registered on the CDS platform. Financial experts blame this trend on limited stockbroker engagement with small clients and passive investment behaviour exhibited by many retail players.
According to CMA’S 2015 data, out of 42,000 investors listed on the CDS database, about 35,000 are retail participants while less than 12,000 investors are rated active. An active investor refers to a market participant, who trades at least once a month.
“Despite introduction of the Easy Portal, stockbrokers still see opportunities for generating trading revenues from retail investors,” argued Joram Ongura, a stockbroker at SBG Securities Ltd. Many of the retail participants are passive players in the market and always need to be alerted about new investment opportunities by stockbrokers before exploiting them.
“It is also likely that most of the retail investors will not afford research data expenses that will be charged by the exchange in the near future. This means that such investors will be prompted to utilise stockbrokerage services that do not carry specific user costs for market research data provided to clients,” argued Joram Ongura, a stockbroker at SBG Securities Limited.