The fall in the shares of the companies could be attributed to a fall in demand as foreign investors withheld their money, while others sold off their share to either keep cash or reinvest in their home countries and other markets considered safer.
The market value of the companies listed on the Uganda Securities
Exchange also known as the Total Market Capitalisation fell by more than 15% in
the financial year ended June 2020, as economies in the region experienced
The fall in the shares of the companies could be attributed to a fall in demand
as foreign investors withheld their money while others sold off their share to
either keep cash or reinvest in their home countries and other markets
The USE saw the value of the companies on with stocks on its counters, go from
22.66 trillion shillings to 19 trillion shillings. The most affected companies
were those cross-listed from the Nairobi Stock Exchange, which all saw their
share prices fall at varying rates.
The cross-listed stocks are Centrum, East African Breweries Ltd, Equity
Bank, Jubilee Holdings, KCB, Kenya Airways and Nation Media and Uchumi. It was
largely the same for the locally listed companies which, apart from the
unchanged BAT shares, all saw an overall decline in prices.
The value of the domestically listed companies, or the domestic market
capitalization, is Shillings 4.27 trillion, having dropped 13% from Shillings
4.9 trillion. Uganda Clays share price fell by 40% followed by Cipla at
37.5%, while NIC prices fell by 30.8% followed by Umeme 18.3%, Stanbic 17.2%,
Bank of Baroda 14.4% New Vision 4.6% and DFCU 3.7%.
This adds to the fact that for the last listing of shares on the market was in
2018 by Cipla Quality Chemicals Ltd. This has affected the drive by the
Capital Markets Authority and other sector players to grow the stock market as
the main source of long-term cheap capital to drive investments.
According to the Capital Markets Authority, apart from the foreign investors being
influenced by the COVID-19 pandemic to sell off, the market was already being
affected by the strengthening of the US dollar, which attracted investors back
to the US.
But overall, CMA Chief Executive Keith Kalyegira says the market has been profitable
for both long-term buyers of shares and the traders, adding that it is more
important as a source of capital and preservation of personal money.
// “Cue in: The annual return ranges…..
Cue: in:….. Some of them are actually institutions.”//
The National Social Security Fund is the largest investor on the USE, having
about Shillings 165 billion in seven out of the nine local listed companies,
but also in a number of other cross-listed companies. The Fund says it has more
than Shillings 5 trillion ready for investments but the market dynamics and the
laws regulating it limits how much it can invest.
The CMA boss also reveals that there is a growing pool of capital through the
Collective Investment Schemes, like retirement benefits schemes and investment
clubs among others.
In 2019/2020, the investment schemes more than doubled to Shillings 388 billion
in assets under management by asset managers. These belong to about 8,900
clients, and the CMA attributes this to the increased awareness about the investment
schemes among local investors, while the growth was accelerated during the
period of the covid-19 pandemic as people locked for less risky investment
The authority also appeals for better management of the government treasuries,
a system where the government through the bank of Uganda gives the public
opportunity to invest their money in government assets. Apart from being
almost fully risk-free, they have a high rate of return of up to 16 percent.
However, Kalyegira calls for stricter regulations of the commercial banks that
deal in these treasuries so that the public gets more confidence in the market.
// “Cue in: We need to…
Cue out:…any one time.”//
The worry is however, that the small and medium scale enterprises are hardly
borrowing from even the available sources of capital including commercial
banks, and will be hard to convince to go for the stock markets to raise the
The chairman of the Uganda Institute of Bankers and Financial Services, Louis
Kaekende says, the SMEs in Uganda cannot grow when they are still borrowing
from friends and relatives.