East African stock markets faced a difficult year and the situation is unlikely to change in 2019, with analysts citing the region's increased exposure to foreign debt as a risk.
Global research firm Focus Economics has warned that emerging and frontier markets are at the risk of heightened volatility in their financial and equity markets and a sizeable currency depreciation in 2019, largely due to higher yields in the United States, increase in oil prices and increased exposure to foreign debt.
The firm notes that increased oil prices are putting pressure on some oil-importing countries, worsening their current account positions while higher yields in the US are likely to cause foreign investors to sell off their stocks in African markets.
In Kenya, the performance of the equity market slowed down during the nine months to September 30, with the Nairobi All Share Index shedding 7.73 per cent of its value to 149.67, from 162.21 in the same period in 2017.
The number of deals dropped 13.37 per cent to 72,155 from 83,295.
The Kenya Capital Markets Authority attributed the decline to increased sales by foreign investors due to several factors, among them profit warnings and declining profitability of listed companies.
However, foreign investors sold shares worth Ksh6.7 billion ($67 million) compared with Ksh11.12 billion ($111.2 million) in the same period in 2017, which was an electioneering time.
According to the National Treasury, the decline in share prices reflected trends in the global equities markets, as investors shifted to bond markets in expectation of a further rise in interest rate in the United States.
Analysts at the global advisory firm StratLink said foreign investors sold shares in firms listed on the Nairobi Securities Exchange and those cross-listed at the Ugandan and Tanzanian bourses such as KCB, Equity Bank, Kenya Airways, Jubilee Holdings and Centum Investments.
In Tanzania, the Dar es Salaam All Share Index fell 15 per cent to 2,105.2, from 2,482, with the total number of deals plummeting 94 per cent to 2,107, from 35,032.
This was largely due to the decrease in share prices for five key counters - Tanga Cement Company Ltd, Swissport Tanzania Ltd, TOL Gases Ltd, Tanzania Breweries Ltd and Swala Oil & Gas Ltd.
In Kampala, the Uganda All Share Index declined six per cent to 1,824.81 from 1,718.28, with the number of deals falling by 17 per cent to 1,405 from 1,693 in the same period.
Global rating agency Moody's Investor Service said the growing debt burden in Kenya, Rwanda, Tanzania and Uganda is weighing heavily on their fiscal strength and credit quality.
Kenya has the highest public debt in the region, which is projected to reach 60 per cent of GDP in the next two years.
However, Moody's expects the rise in public debt to be most pronounced in Uganda and increase by six percentage points to 44.1 per cent of GDP in 2019.
Rwanda has had the most rapid accumulation of debt, reflecting a transition in donor support from grants to concessional loans, according to Moody's.