4 September 2017

East Africa: Regional Stock Markets' Performance Declines

Kampala — Political risks, regulatory changes and macroeconomic environment instability stifled growth in East Africa's stock exchanges in the six months to June 30, 2017, leading to a decline in the market value of shares held by investors.

Elections in Kenya and Rwanda, interest rate caps in Kenya, and the Tanzanian government's enforcement of laws requiring telecommunications and mining firms to offload 25 per cent and 30 per cent of their shareholding, respectively, to locals, impacted the performance of the regional stock markets.

The Nairobi Securities Exchange saw a five per cent drop in profit while a number of stockbrokers and fund managers that have released their half-year interim results, such as Kingdom Securities, Dyer & Blair Investment Bank and Cannon Asset Managers, posted losses.

ICEA Lion Asset Managers posted a more than 50 per cent fall in net profit as brokerage commissions on trading activities plunged.

There was a rise in the cost of living during the period, reducing the purchasing power of households.

"The first half of the year was marked by significant inflationary pressures triggered by poor weather conditions," Geoffrey Oundo, the NSE chief executive said.

Bank stocks

The decline in the value of bank stocks on the NSE, which started after the enforcement of the interest rate caps on September 14, 2016, spilled over in the first quarter of 2017 as investors continued to evaluate the impact of interest rate caps on the lenders' earnings.

In Tanzania the value of listed stocks and trading turnover declined during the first quarter of 2017 due to decreased activity by foreign investors and selling by local investors.

Experts argue that while the decision by Tanzania to compel telco's and mining firms to relinquish part of their shareholding to the locals could boost activity on the Dar es Salaam Stock Exchange, the policy could also scare away foreign investors.

In Rwanda, the number of transactions on the RSE fell to 93, from 95.

In Uganda, the equity market performed relatively better, compared with its regional peers and analysts expect improved performance in the second half.

The number of shares traded on the Uganda Securities Exchange during the six months to June 30 increased to 37,833,446 from 9,601,589 while turnover rose to Shs12.8b ($3.5m), from Shs2.29b ($629,608).

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