For Online E-newspaper
The East African : Aug 4th 2014
MONEY AND EQUITY MARKETS AUGUST 2-8,2014 STOCKMARKET Equity markets performance to dip for the remainder of this year Analysts say no majo≥ movements in ma≥ket indices a≥e anticipated at the fou≥ bou≥ses in the ≥egion By SCOLA KAMAU Special Correspondent A ctivity on the East African equity markets is expected to slow down for the remainder of the year. This has been partly occasioned by capital outflows as the US Federal Reserve finally moves to end its debt recall. Analysts said no major movement in market indices was anticipated at the Uganda, Rwanda, Nairobi and Dar es Salaam bourses in line with the tight liquidity in global markets likely from October, when the US closes the bond buyback programme. “We anticipate a low to medium level of activity as a result of a decrease in money market yields and investors trying to take advantage of the awaited dividends,” PineBridge Investments senior investment manager Edward Gitahi said. The bond buyback of up $35 billion per month currently was started in October last year in an effort to stimulate the economy by returning money to investors who had bought the treasuries. The programme depressed US interest rates, prompting investors to look elsewhere for higher returns. However, other analysts said the end of the US debt recall could benefit the markets if investors moved money from emerging markets like Brazil, Russia, India, China and South Africa (Brics) to frontier markets like Kenya and Nigeria. “The US investors may pull out their investments from emerging markets like Brics into the region, which is a frontier market,” said NIC senior research analyst Samuel Gichohi, adding that increased foreign investments would boost the equities market. The NSE 20 Share Index has in the re- cent past been buoyed by counters such as Bamburi Cement, ScanGroup and Britam. “Although companies are posting im- pressive results, the NSE 20 Share Index may remain flat, we are not seeing much appetite across counters. The 5,000 mark looks close but remains hard to achieve, $35b NEW RULES Unveiling of NSE’s new offices in Nairobi. Picture: File at least not this year,” said Kamau Kuria, an analyst at Kestrel Capital. The NSE 20 Share Index has been flat in the year to date. “Prices are being driven by company performance but there is high liquidity in the market with fewer products to purchase at the equities market. Getting more companies to list on the bourses has remained a challenge for governments,” said Stanbic Investment Bank research analyst Eric Musau. He added that the profits reported by companies were not strong enough to boost appetite, adding that the flat performance could be lifted by rights issues. Poor performance in the agriculture The bond buyback per month by the US government to spur economic growth sector because of unfavourable weather and low global prices for tea and coffee is also likely to dampen enthusiasm for farm stocks. Old Mutual Securities analysts said Uganda was already experiencing jitters ahead of the 2016 elections, which could deter credit expansion amid concerns over higher taxation. Uganda plans to finance 82 per cent of its budget from domestic revenues with the banking sector likely to be subjected to new taxes. In Tanzania, foreign investor participation has reduced in the past two weeks. East African bourses have eased the conditions that issuers looking to list securities on the four East Africa bourses will have to meet in measures meant to make the region a single investment hub. Under the proposed rules , issuers will only present one information memorandum to the national regulator and pay between Sh1.7 million ($190,505) depending on the size of the offer. Presently, issuers have to give an information memorandum to each country’s regulator when they seek cross-listing. There have been no regulations for multiple listing on the bourses at a go The Dar es Salaam Stock Exchange Index last week reached 2346.73, a 25.48 per cent increase year-to-date from 1870.18 points in January. It had reached a year high of 2379.86 points on July 17. “Simba, TOL, TBL and Twiga dominat- ed activities in the Industrial and Allied segment. We expect this to continue with on TBL and SIMBA shares,” said Brenda Rose Massay, a business analyst at Tanzania Securities Ltd. The listing of Swala Oil and Gas Tanza- nia last week is expected to see increased despite investors’ historical leaning towards government securities. 49 Business watch NIC seeks app≥oval to c≥oss-list sha≥es By KENNEDY SENELWA Special Correspondent UGANDA’S NATIONAL Insurance Corporation Ltd has announced plans to cross-list its shares on the Nairobi Securities Exchange in a bid to raise its visibility in East Africa. According to company officials, NIC, which is 60 per cent owned by Industrial and General Insurance (IGI) of Nigeria, is seeking to access a pool of investors to improve its competitive edge in the region. The insurance company, which is list- ed on the Uganda Securities Exchange, wants to take advantage of robust trading at the NSE to boost its market share. The firm is already seeking approval from regulatory bodies in Uganda and Kenya for cross-listing of its shares. Upon completion of the process, NIC will become the second Ugandan firm to trade its shares on NSE, after Umeme, a power utility cross-listed last year. ‘‘The cross-listing will lead to in- creased share liquidity, better price discovery, access to a wider pool of investors, and better prospects of raising capital,” said NIC vice chairman Dr Martin Aliker. He said cross-listing will lead to bet- ter visibility and an improved competitive edge in the regional market. NIC is the only insurer that has been trading on the Ugandan bourse since 2010. The listing came with additional com- pliance reporting requirements to USE and the usual obligations to the Insurance Regulatory Authority. IGI acquired majority shares in NIC in June 2005 through a competitive international bid. NIC ownership Before then, NIC was 100 per cent owned by the Ugandan government. IGI is also the largest shareholder in Societe Nouvelle d’Assurances du Rwanda (Sonarwa), which has insurance market share of about 64 per cent. NIC also intends to change its name to NIC Holdings Ltd to separate the life and non-life businesses, in compliance with Uganda’s insurance regulations, said managing director Bayo Folayan. The insurance law, which was amend- ed in 2011, requires that life and general business be separated into two different entities. The deadline for all insurance com- panies to comply with the requirement is December this year. Life insurance companies are also required to increase their paid-up capital to $1.2 million, from the current $394,000, while the non-life companies are to increase theirs to $1.6 million.
July 28th 2014
Aug 11th 2014