Offshore investors give Uganda’s bourse wide berth, turnover dips to $5,500 a day

Saturday October 23 2021
Capital stock dealers

Crested Capital stock dealers trading at the Uganda Securities Exchange in Kampala. PHOTO | MORGAN MBABAZI


Offshore investors generally shunned the Uganda Securities Exchange between March and October 2021, considered the most opportune time to invest as it is characterised by declaration and payments of full year dividends, release of half year results and special corporate announcements.

Following the end of the offshore investor season, average trading turnover at the USE dropped to less than Ush20 million ($5,493) per day at the beginning of October while trading volumes fell to less than 200,000 shares per day.

Most of the offshore investors were reportedly active on the Stanbic Holdings, Umeme, DFCU and Uganda Clays counters in a scenario that yielded mixed results for those listed companies.

Since these investors — hedge funds, mutual funds, pension funds and life insurance funds — play in overseas financial markets mainly for higher returns, they often seek out competitive financial markets.

“Offshore investors are critical in driving share prices and share trading volumes in the stockmarket because of huge orders generated by them. But small trades ranging between 1,000 and 10,000 shares made by retail investors hardly moved the market and that is why some of the share prices remained stagnant since the year started,” said Isaac Mwigo, a stockbroker at Equity Stockbrokers Ltd.

“Most of the offshore investors that have been active this year on our books are based in Mauritius and the US and were keen on DFCU Ltd, Umeme Ltd and Stanbic Bank. However, offshore investors have generated less business for this market in 2021 compared with last year,’’ Mwigo added.


Most investors are driven by the desire for routine dividend payments and in return, trade activity associated with offshore players offers huge revenue streams for exchange, stockbrokers, dealers and Capital Markets Authority through commissions on shares trades.

Equity trades at the USE are charged a 2.1 percent commission, with stockbrokers earning 1.9 percent of this figure while the balance is shared by the rest.

Mixed performance

Whereas average trading turnover recorded at the USE stood at less than Ush50 million ($13,732) per day during the first quarter of 2021, daily turnover steadily rose to record highs of Ush2 billion ($549,290) to Ush3 billion ($823,935) between April and September.

“Some stockbrokers did trades of around 20 million shares that were linked to offshore investors. This means lower trading revenues for us this year and I suspect it was caused by bigger offshore investor interest in the Nairobi Securities Exchange and other emerging financial markets,” Mwigo said.

Uganda Clays Ltd registered a small boost in its share price that rose from Ush5 ($0.001) recorded at the beginning of 2021 to Ush8.50 ($0.002) by close of September amidst remarkable earnings posted at the end of December 2020 and June 2021. Fresh interest towards UCL is evidenced in a huge buy order of 15 million shares placed earlier this month, according to stockbrokers’ order books.

Some offshore investors dumped Umeme Ltd shares, that saw its price fall from Ush220 ($0.06) to new record lows of Ush195 ($0.05) and Ush189 ($0.052) in August signalling impatience towards uncertainty over its 20-year electricity distribution contract.

Signs of lower trading momentum by offshore investors was noticeable in stockbrokers’ order books amidst widespread effects of the Covid-19 pandemic.

Stanbic Holdings Ltd’s profit after tax increased from Ush169 billion ($46 million) in June 2020 to Ush203 billion ($55.8 million) in June 2021.

East Africa is still expected to show strong growth going forward and investors will remain interested. But, like in most other countries, Uganda’s vaccination programme has been disappointing. The virus will remain a concern for longer than previously expected. Uganda is hesitant to implement tighter lockdown restrictions than many other African countries. This of course benefits the health situation, but the risk of tighter controls will weigh on business sentiment for some time,” said Jacques Nel, Head of Macro Economic Analysis at Oxford Economics Africa in South Africa.