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Umeme, Stanbic dominate trading at USE in Q2

Patrick Bitature (middle), the Umeme chiarman rings a bell at the USE recently.

Market executives anticipate good performance as COVID-19 threat is minimized

Kampala, Uganda | JULIUS BUSINGE | Trading in the second quarter of 2020 at the Uganda Securities Exchange registered a tremendous decline as  Uganda’s  equity  markets  continued  to  feel  the  impact  of  COVID-19  pandemic, according to the quarterly bulletin for the period April – June.

Published by the USE, the bulletin indicate two counties – Umeme and Stanbic to have enjoyed trading dominance as they continued to attract the attention of investors at the Nakawa based bourse.

According to the bulletin, the second quarter of 2020 accounted for a total turnover of Shs3.4billion compared to a combined total of Shs25.6billion that was traded between April – June 2019.

Out of this turnover (trading amount recorded), the UMEME  counter  took  the  first  position,  with  a  posting  of  Shs3.1bn,  accounting  for  91.70% of  the  total  turnover.  Stanbic came second after accounting for 4.49%.

The other counters, Bank of Baroda Uganda, CIPLA, Uganda Clays Limited and DFCU posted 2.77%, 0.81%, 0.10% and 0.08% of the quarterly turnover, respectively.

The  rest  of  the  counters  represented  by  National  Insurance  Corporation  and  New  Vision  Limited  had a combined turnover of Shs1.7million.

The  All  Share  Index  opened  at  1,305.84  rising  steadily  to  a  high  of  1,396.52  in  May  but  dropped  gradually  to  close  at  1,369.8.

This trend was due to changes in different market prices and the exchange rate. The  local  share  index  fell  steadily  from  342.21  to  340.14  in  May  2020  and  plunged  further  to  close  at  339.17  in  June  2020.

Meanwhile, there were six treasury bonds re-opened in the quarter with a value of Shs940bn which were listed. The current total value of the Government Bonds listed on the bourse stands at Shs12.6trillion.

The corporate bonds segment remained inactive throughout the period as investors in this segment continued to hold onto their investments and receive interest that is paid out semi-annually.

There are two corporate bonds currently listed on the USE. One is African Development Bank Bond maturing in February 2022 and the other is Kakira Sugar Limited Bond maturing in December 2023.

Uncertain future

Market analysts say that while the  ultimate  growth  outcome  is  still  uncertain,  an  even  worse  scenario  is  possible  if  it  takes  longer  to  bring  the  health  crisis  under  control. The pandemic, analysts say  will  result  in  output  contractions  across  the  vast  financial  markets.

This view is also supported by Bank of Uganda in its June 2020 Monetary Policy Report. The report says that although  Uganda  is  gradually  easing  the  lock  down  measures  instituted  to  contain  the  spread  of  the  pandemic,  the  adverse  consequences  of  the  global  impact  of  the  pandemic  on  financial  markets  could  persist  through  the  remaining  part  of  2020.

The performance of the market will continue to depend on the health of the economy largely influenced by inflation and commercial bank lending rate movements.

According to Bank of Uganda and Uganda Bureau of Statistics data, inflation  remained  relatively  subdued  with  annual  headline  and  core  inflation  averaging  3.4%  and  3.8%  in  the  second  quarter of 2020 compared to 3.3% and 2.9% in the first quarter of 2020, respectively.

Year on year headline inflation rose to 4.1% driven by higher annual core inflation as a result of high transport costs following the relaxation of COVID-19 lock down measures.

Bank   lending   to   households   and   businesses   remains   an   important channel through which monetary policy affects the economy.  Commercial  bank  lending  interest  rates  continued  to  decline  in  line  with  the  accommodative  monetary  policy  stance.  Lending  rates  on  shilling  denominated  loans  rose  to  18.8% in  May  2020  from  17.8% in  March  2020.  On the other hand, lending rates on foreign currency denominated loans fell to 4.2% in May 2020 from 6.6% in March 2020.

New developments

During the period under review, the  USE management launched  an  online  account opening platform that will enable Ugandan investors to  seamlessly  open  up  Securities  Central  Depository  (SCD)  accounts.

This platform is  an  upgrade  to  the  USE  Easy  Portal  which  is  an  online  platform  that  initially  enabled  investors  to  view  their  security  holdings  and  monitor  their  stock  transaction  activities.

The  platform  offers  an  easy,  fast  and  convenient  experience  to  local  investors  despite  the  impediments  on  physical interactions as a result of the COVID-19 pandemic.

Operations  at  the  USE  were  largely  manual  at  its  inception  in  1997.  In 2010, the USE started operating a securities depository,   which   ushered   in   a   paperless   clearing   and   settlement    regime.

To further    enhance    efficiency,    the    exchange invested in an Automated Trading System in 2015 which meant that brokers were able to execute trades from various   locations   over   the   internet.

These   technological   advancements, according to USE officials have seen a shift from formerly issued paper certificates to electronically issued securities.  Currently, 98% of all shares traded on the Exchange are in electronic form and only 2% are in paper form.  The exchange started work on a platform that would enable the tracking of investments online at the end of 2019. These technological developments are expected to support efficient trading in the next quarter and thereafter.

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