Modest half-year results, limited movement in share prices, and the likelihood of more exits by foreign investors in the second half of 2019 have resulted in cautious trading at the Uganda Securities Exchange.
There was however increased activity at the counters of Stanbic Holdings Ltd, Bank of Baroda Uganda, DFCU Ltd and Umeme Ltd triggered by the run ahead of the book closure dates.
A book closure date is a deadline issued by a listed company that requires investors who are interested in receiving dividends to either acquire or maintain shareholding in the business by the specified date so as to be eligible for dividend payments.
Book closure dates for the four listed firms materialised in May and June, prompting many institutional investors to escalate buying of shares on those counters during that period in order to benefit from handsome dividends declared for 2018.
Stanbic issued a dividend of Ush1.9 ($0.0005) per share for 2018; its book closure date was May 30. Bank of Baroda increased its dividend per share from Ush6 ($0.002) to Ush10 ($0.0027) for 2018 and closed its books on June 25.
Daily turnover at the USE rose to more than Ush1 billion ($267,820) in some trading sessions, while volumes surged to more than 100,000 shares in May and June, according to market reports.
Most of the large trades were done on the Stanbic and Umeme counters, while small but consistent trades were made on Bank of Baroda.
"High capital expenditure demands exerted by the central bank on the affected banks could complicate their financial challenges. Some of those demands include setting up local data management centres, which are costly to install and maintain for less profitable commercial banks," said Patrick Mweheire, managing director of Stanbic Bank Uganda and chair of the Uganda Bankers Association.
The latest data from the USE shows that the total turnover for April-June 2019 was Ush35.4 billion ($9.5 million), while total trading volumes amounted to 540 million shares.
Stanbic accounted for 91 per cent of total turnover and 50 per cent of overall trading volumes during the second quarter of 2019, followed by Umeme. Institutional investors accounted for 91 per cent of USE turnover in the second quarter of 2019, according to the data. The USE's All Share Index dropped from 380 points to 375 points in the same period.
"Institutional investors are less likely to remain active during the second half of this year and that may result in flat trading figures for the end of 2019. Half-year results for listed companies seem uncertain and their impact on trading patterns is not predictable at this time. We don't have any initial public offerings on the table right now, and this implies few chances of windfall trading growth for the exchange between July and December 2019," said Paul Bwiso, USE chief executive officer.
Listed banks -- the most dominant segment at USE in terms of floated shares -- have hinted at modest growth patterns in the first six months of 2019, given little government spending in productive areas, low consumer spending, and tighter regulatory requirements introduced by the central bank, particularly on liquidity ratios.
"Our performance in terms of asset growth, credit growth, deposits, interest incomes and non-interest revenues appears flat as at end of June 2019. But our overall costs dropped significantly in the same period. However, overall industry costs grew faster than total revenues by a net margin of seven per cent at the end of last year, pushing six banks into the red," Mr Mweheire said.
Recent data released by the Bank of Uganda indicates that total assets in the banking industry grew by 9.9 per cent to Ush26 trillion ($6.96 billion) by the end of March 2019, from March 2018.