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The East African : December 30th 2013
MONEY AND EQUITY MARKETS DECEMBER 28, 2013 - JANUARY 3, 2014 WEAK AND STRONG MONIES Regional currencies recorded mixed results throughout 2013 Kenyan, Ugandan and Tanzanian shilling did well, but the Rwandan f≥anc closed the yea≥ at its weakest A JOINT REPORT The EastAfrican of 2013. The Rwandan franc closed the year at its weakest against the dollar over the 12 month period, but the currencies of Tanzania, Uganda and Kenya registered an impressive performance. The Rwandan franc lost 5.8 per E cent to trade at an average of Rwf 669.41 last week, up from Rwf630.40 at the beginning of the year, even though the central bank intervened to stabilise the currency. The signs of a battered franc were seen when the currency hit a ninemonth low of Rwf655/660 to the dollar in July. The franc’s performance has reversed the moderate depreciation rate of 1.8 per cent seen in the first half of 2013. The central bank aims to keep the depreciation rate at 2.5 per cent. One of the reasons for the drop was the suspension of foreign aid in April (it resumed in the second half in the year.) While inflation in Rwanda has been moderate for much of the year, at single-digits, analysts say the franc is likely to weaken in coming months as demand for imports rises. The depreciation of the franc, according to John Rwangombwa, governor of the National Bank of Rwanda, is the result of a growing import bill of mostly capital goods without supportive substantive exports. The country’s imports rose to $1,135.3 million in the first half of this year, up from $1,046.8 million during the same period last year. This has reversed the moderate depreciation rate of 1.8 per cent during the first half of 2013, before rising to an all-time high of 5.8 per cent last week. “We could expect a further deteri- oration in the balance of payments, and a still larger import bill. This should be of some concern — it is already around 11 per cent of GDP,” Mr Rwangombwa said. The Ugandan shilling registered the best performance in the region, appreciating against the US dollar for most of the year; the performance was supported by seasonal factors, offshore inflows attracted by higher yields on treasuries, and inflows from NGOs and exports amidst weak dollar demand. Offshore investors are mainly investing in shorter term government securities as opposed to long term securities. Adam Mugume, Bank of Uganda’s executive director for research, said the Ugandan shilling had appreciated by 6.3 per cent through the year. The Ugandan currency was at Ush2,683.8 to the dollar at the beginning of the year, and up to Ush2,513.7 in December. “This is in contrast to the depre- ciation of several other currencies. For instance, during the same period, depreciations on average included the South African rand by 17.7 per cent; the Euro by 3 per cent; the Tanzanian shilling by 1.6 per cent; and the Rwanda franc by 5.7 per cent. However, the Kenyan shilling appreciated, but by only 0.4 per cent,” Mr Mugume said. The Kenyan shilling traded at an average of Ksh85.71 against the dollar in December, up from Ksh86.07 in January, Central Bank of Kenya data shows. However, in mid December, the shilling was trading at Ksh86.75, blamed on increased economic activity due to the December holidays. The currency registered minimal gains despite the IMF announcing that it had disbursed its last A widening deficit across the East African countries slowed their currencies’ performance The Ugandan shilling performed the best in East Africa in 2013. Picture: File tranche of Ksh9.4 billion ($109.3 million) in December, under Kenya’s extended credit facility with the fund. The Tanzanian shilling settled at Tsh1,581 against the dollar last week, according to the Bank of Tanzania, from Tsh1,585 in January and Tshs1,599 in April. “We expect the shilling to strengthen against the dollar during the coming week due to local currency requirements to meet month and year end obligations,” said Upendo Lyatuu of research and bonds trading at Tanzania Securities Ltd. A drop in inflation rates to 6.3 per cent in November held the shilling stable. Widening deficits across the East African countries slowed their currencies’ performance, experts said. “It makes the economies more vulnerable as they seek more capital inflows to finance the deficit,” said Andrew Mold, senior economic affairs officer at Sub-Regional Office for Eastern Africa of the United Nations Economic Commission for Africa based in Kigali. In Kenya, figures from the Kenya National Bureau of Statistics show that the country imported goods worth Ksh1.04 trillion ($12 billion), Ksh22.7 billion ($263 million) more than in the same period last year. “There were a lot of exports; the East Africa market is also problematic, with Uganda and Tanzania imposing a 25 per cent excise duty on imports, which has affected Kenyan exports to the region,” said Betty Maina, chief executive of the Kenya Association of Manufacturers. By Scola Kamau, Esiara Kabona, Martin Luther Oketch and Joseph Mwamunyange ast African currencies registered mixed performance at the end Business watch Nigeria’s Guaranty Trust Bank takes 70pc stake in Kenya’s Fina Bank Nigeria-based Guaranty Trust Bank (GTBank) has acquired a 70 per cent stake in Kenya’s Fina Bank. In the deal, Fina Bank‘s branches in Kenya, Rwanda and Uganda will be rebranded as GTBank subsidiaries. This follows a share sale and purchase agreement signed in July. According to GTBank, the acquisition of Fina Bank is part of a structured expansion programme that will allow the bank to tap into the vast business opportunities across East Africa. Officials at the bank say similar acquisitions are likely to be made in other East African countries soon. Investors advised on take-up of shares in DSE’s ‘risky’ EGM segment Tanzania’s Capital Market and Securities Authority chief executive officer has advised investors eyeing the Enterprise Growth Market (EGM) to seek advice before investing in the new segment. Nasama Massinda said companies listed under the EGM are start-ups and small and medium sized enterprises that have high growth potential but do not have a proven track record of profitability, making them riskier than those of more established companies. “Investors should make the decision of investing only after careful consideration, and, if appropriate, after consultation with an independent financial adviser,” she said. I&M Bank first tranche medium-term note oversubscribed by $7.6 million 45 I&M Bank’s first tranche of its $117 million medium-term note was oversubscribed. Picture: File I&M Bank’s first tranche of its Ksh10 billion ($117 million) medium-term note was oversubscribed by 21.8 per cent, an equivalent of Ksh655 million ($7.6 million). The bank, listed on the Nairobi bourse, offered interest rates above the government’s 182-day Treasury bill rate. The bank said 94 per cent of the investors opted for the fixed rate return of 12.8 per cent, two per cent above the Treasury bill. The lender received bids amounting to Ksh3.655 billion ($425 million), way above its target of Ksh3 billion ($34.9 million). The second and third tranches will be issued in 2014 and 2015. Scangroup share price back up after additional shares hit the market Scangroup’s share price hit Ksh51 ($0.59) last week, rebounding from a one-year low of Ksh46.25 ($0.54) the previous week. The stock had fallen by 12 per cent as additional shares created from the equity stake purchase by global communications firm WPP, a London-listed company, hit the market. Analysts had pointed to the share dilution as the cause of the drop in price, though the benefits of the acquisition are expected to reflect in 2014, the Business Daily reported. WPP now holds a 50.1 per cent stake in Scangroup, up from 33.61 per cent, following the success of the transaction.
December 23rd 2013
January 6th 2014