Investors of the Umuganda bond are still holding on to their shares, dampening hopes that it’s listing is likely to boost trading.

The bond was recently listed on the Rwanda Stock Exchange by the International Finance Corporation (IFC) — the investing arm of the World Bank.

By July 9, the Rwanda Stock Exchange (RSE) had received bids worth Rwf200 million but there were no offers signalling that investors in the primary market were holding on to the paper.

The IFC bond is expected to stimulate more trading in the secondary market.

During the first week of trading, only Rwf26.5 million had been raised in the secondary market as the buyers of the paper in the primary market hold on to maturity.

No alternative investments

“The investors are holding on to the paper because there are no alternative investments to put their funds in,” said Davis Gathaara, managing director of Baraka Capital, a brokerage firm. “Investment decisions will have been made to lock in funds for the duration of the bond and the price they would get if they sold on the market may not make up for the interest they would be losing over the duration of the bond.”

Rwanda Social Security Board (RSSB), international investors, domestic asset managers, insurance companies and banks are some of the investors who rushed to buy the IFC paper in the primary market.

Some investors in the IFC paper say it is very attractive because the coupon rate is high. “The IFC bond is too safe to be traded now,” said Daniel Ufitikerezi, managing director of RSSB.

High coupon rate

The bond has the highest coupon rate at 12.25 per cent per year. The first corporate bond issued by I&M has 10.5 per cent coupon rate. The bank has a 10-year I&M Bank bond worth Rwf10 billion, which was issued in 2010.

There are also three other government bonds in the market. The latest is the Rwf12.5b treasury bond issued in February to raise funds for infrastructure projects and boost activity at the bourse.

The biggest problem, most brokerage firms say, that has resulted in slowing of business on the RSE is the limited number of products both on the equity and bonds markets.