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The East African : May 12th 2014
MONEY AND EQUITY MARKETS MAY 10-16,2014 CHANGE USE proposes new rules of trade with an eye on increased liquidity P≥oposals include a sho≥te≥ settlement pe≥iod and new daily p≥ice ma≥gin BY MARTIN LUTHER OKETCH The East African U ganda Securities Exchange (USE) plans to change its trading rules in a development that executives say will increase liquidity at the bourse. USE said it had submitted the new rules to the regulator, the Capital Markets Authority, and expects to get approval by the end of the month. USE had proposed lower- ing of the settlement period to two days from the day of trading, and the daily price margin by which securities listed are allowed to fall or rise. This is expected to increase trading activity of highly priced stocks and help boost price discovery. The new trading rules will allow stocks to rise or fall in multiples of one shilling as opposed to the five-shilling multiple under the current rule. USE says that under the proposed trading rules stock price movement (spreads) will also be in the threshold of percentages, whereby prices can also fall or rise in the 1-15 per cent bracket. “When stocks start trading in multiples of one shilling, liquidity will increase in the market because there is going to be increased activity,” said CMA chief executive Keith Kalyegira. He said the old rule was limiting big block trade at the stock exchange when it came to price changes. “It was difficult for block- trade in the stocks of high prices like British American Tobacco Uganda,” he said. Stocks with low prices like Stanbic Bank have also been facing difficulties in price adjustments under the old trading rules. Stanbic Bank Uganda’s share prices is at Ush30 Business watch CRDB proposes a 16.6pc raise in dividend payment CRDB has proposed to raise dividends by 16.6 per cent to Tsh14 ($0.008) for the year ended December 2013 up from Tsh12 ($0.007) for the year ended December 2012. Shareholders are expected to approve the raise during the firm’s annual general meeting slated for May 10. The bank saw a rise in its profit in 2013 to Tsh84.4 billion ($51.2 million) compared with Tsh80.5 billion ($48.8 million) in 2012. Last year, the bank opened six new branches and four service centres besides installing 66 new ATMs. Rwanda CRB to help minimise risk of non-performing loans Commercial banks operating in Rwanda will cut down on non-performing loans, thanks to a new system by the country’s Credit Reference Bureau (CRB) that will help gauge the capability of borrowers to service their loans. The platform will automatically credit individuals and companies according to demographic factors like age, marital and employment status. A credit score of 600 reflects a high level of creditworthiness, while scores between 200 and 300 will be seen as “risky” borrowers, stand little chance of getting loans. Stocks with low prices like Stanbic Bank, which have been facing difficulties in price adjustments under the old trading rules, stand to gain. Picture: File per share, while Uganda Clays has been trading in the Ush20 band per share. USE becomes the second bourse in the region — after the Nairobi Securities Exchange — to trade stock prices in one-shilling multiples. In Kenya, investors may When stocks start trading in multiples of Ush1, liquidity will increase in the market because there is going to be increased activity.” Keith Kalyegira, CMA chief executive soon start trading at the NSE without physically placing orders with brokers, in reforms aimed at making the market more efficient. The Capital Markets Authority in Kenya has allowed the NSE to come up with rules and structures for the proposed direct market access trading, which enables investors to log in to stockbrokers’ systems and place “buy” and “sell” instructions. The 24-hour placement of orders will enable foreign-based investors to place orders in spite of the time difference, which has often locked out investors in different time zones whose working hours come when the stock market is closed. The East African Stock Exchanges Association has also been pushing for change in the rules in order to ease cross-border trading. In the Council Directive on Public Offers of Securities-Equities, the Common Market Protocol directs the East African Community states to harmonise their 53 ONE-SHILLING FALLS, RISES The new trading rules will allow stocks to rise or fall in multiples of one shilling as opposed to multiples of five shillings under the current rule. USE says that under the national laws, policies and systems to help deepen integration. Mr Kalyegira said there are plans to reduce the time taken for trade settlement from the current five days to two. The trade manager at the USE, Andrew Mwima, said that the new trading rules are about spreads in stock prices. “The new rules will re- ducevolatility in the All Shares Index, the Local Shares Index and market capitalisation,” he said. Increasing trading rules and improving the settlement period has huge effects on trading. In 2009, Kenya enacted a series of rules that tripled annual bond turnover. One, reporting of cutoff rate in auctions, reduced waiting time for trading newly issued securities from T+3 to T+1. The country also proposed trading rules stock price movement (spreads) will also be in the threshold of percentages, whereby prices can also fall or rise in the 1-15 per cent bracket. automated the trading and settlement of both government and corporate bonds in the secondary market. This helped push bond turnover, from Ksh107 billion ($1.2 billion) in 2009 to Ksh470 billion ($5.40 billion) last year Other decisions like the in- crease in the maximum tenor of bonds to 30 years have also helped increase turnover by attracting institution investors looking at longer time horizons. Tanzania is drafting rules that will allow municipal councils to issue bonds while both the Dar es salaam and Nairobi bourses have established a new category—the Growth and Enterprise Market Segment (GEMs)— which is expected to increase liquidity. Additional reporting By Peterson Thiong’o Banks will easily tell if a customer can service a loan and act accordingly. Pic: File Cost of goods in Uganda falls, inflation rise in Kenya, Tanzania The cost of goods and service in Uganda fell in April, resisting a price rally that pushed up inflation figures in Tanzania and Kenya. Tanzania inflation edged up to 6.3 per cent in the year to April from 6.1 per cent in March, mirroring a similar rise in Kenya, where the cost of goods and service rose by 6.41 per cent in April up from 6.27 per the previous year. A slower rise in food prices dragged Uganda’s annual headline inflation rate down to 6.7 per cent in April from 7.1 per cent in March. DTB returns 19pc growth in net profit in first quarter Diamond Trust Bank (DTB) has posted a 19.1 per cent growth in net profit in the first quarter, helped by increased interest income. The bank said net profit stood at Ksh1.37 billion ($15.74 million) in the three months ending March 2014, compared with Ksh1.15 billion ($13.21 million) for a similar period last year. Total interest income increased 23.7 per cent to Ksh4.9 billion ($56.32 million) from Ksh3.96 billion ($45.5 million).
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