Kampala — Tullow Oil Plc, the British oil exploration firm which plans to sell its listed shares to Ugandans, will not be included in the valuation process of the performance of listed companies at the internal stock market.

Mr Simon Rutega, the chief executive officer of the Uganda Securities Exchange (USE), said the move will be made as a measure against the misrepresentation of the performance of the stock market (USE) based on Tullow's massive market value.

Tullow's worth

By last Friday, the combined value of Tullow shares (884 million) listed on both the London and Irish Stock Exchanges in the United Kingdom, was equivalent to $17.3 billion (over Shs35 trillion).

Each share was valued at Shs40,226. The company's worth is four times the value of all 11 listed and cross-listed companies at the USE including; Stanbic Bank Uganda, East African Breweries Limited and Kenya Airways.

"Tullow has a huge market capitalisation (entire traded value), if you include it, it will distort the market," Mr Rutega said in a press interview last Friday.

Market distortion

This means that a drastic decline or appreciation in Tullow's share price has the ability to distort the value of the whole market even if those of the locally listed and cross-listed companies remain unchanged.

The performance of the stock market is measured by the USE All Share Index, which takes its account values and volumes of shares of the 11 traded companies at the market.

The oil and gas company is meant to be cross-listed on the USE by April for trading, according to Mr Kenneth Kitariko, the chief executive officer African Alliance Uganda, the stock brokerage firm that was appointed to head the transaction.

"We will probably not include it in our index. What we shall do is have an index for local and perhaps regional companies," Mr Rutega said when asked about the options USE is considering before adopting Tullow's cross-listing in Kampala. He added that any other company which is from out side Uganda, Kenya, Tanzania or Rwanda, will be accommodated in a different index.

Explanation

For international investors who make investment decisions based on the general market performance measured by an index, it would project the false condition of the local economy and performance of the companies. This can discourage them from investing at the market.

By close of trading business last Thursday, the index was up to 827 indicator points although the figure is almost 300 points down from about 1,200 (2008) the highest its has ever gone.

The new figure, however, indicates a recovery from the global meltdown, which deeply affected local and foreign investment shares.