Half-year results set to raise East Africa bourses’ activity

Activity at East Africa’s bourses is expected to go up in the next two months, buoyed by banking stocks, as listed companies release their results for the first six months of this year.
Activity at East Africa’s bourses is expected to go up in the next two months, buoyed by banking stocks, as listed companies release their results for the first six months of this year.

The results will give investors an indication of how the regional economies have performed.

Turnover for the first six months rose sharply at the four stock markets in the region. The Rwanda Share Index, which tracks the performance of Kigali’s two local stocks, gained 39.32 per cent, making it the best performer among its East African peers.

READ: Rwanda bourse emerges top performer among EA peers

“The environment has improved in the region and inflation has fallen. We have also seen significant interest from foreign investors. We should see more activity in banking because of the reporting period, and other companies as well such as East African Breweries and KenGen,” said Faith Atiti, a research analyst at NIC Securities.

Kenya’s largest banks with a regional presence, such as Equity Bank and KCB Group, and Nairobi Securities Exchange-listed multinational banks, such as Barclays and Standard Chartered, usually report first.

Foreign and local investors are expected to continue supporting the markets as interest rates fall across the region making returns from other asset classes, including equities, attractive.

In the first half of this year, the value of shares traded on the Dar es Salaam Stock Exchange (DSE) doubled to Tsh45.35 billion ($28.4 million), from Tsh22.72 billion ($14.46 million) traded over the same period last year.

Similarly, the value of shares traded at NSE rose almost 12 times in the first half of this year to Ksh73.28 billion ($852.1 million), from Ksh6.21 billion ($73.7 million) over the same period last year. The rise was on account of a sharp increase in share prices and volumes traded.

The Uganda Securities Exchange (USE) registered a sharp rise in turnover in May, due to London-based private equity fund Actis selling its majority stake of DFCU to Rabo Development BV and Norfund.

At the Nairobi bourse, foreign investor inflows rose by 27.66 per cent to Ksh9.119 billion ($106.03 million) in the first half of this year, from Ksh7.143 billion ($84.8 million) over the same period in 2012. Foreign investor participation rose to 56.14 per cent in June, the highest this year, reflecting their increased interest in East African capital markets.

READ: NSE half year turnover hits $852 million

At the DSE, foreign investor participation rose to 27.64 per cent; they traded shares worth Tsh2.92 billion ($1.8 million) in the first half of this year, up from 12.89 per cent in the first half of last year at Tsh12.53 billion ($7.8 million).

“Most foreigners still consider our blue chips stocks undervalued, thus they are willing to pay higher than prevailing prices. The appetite is still very high, mostly due to performance (profitability and dividends distribution),” said Magabe Maasa, the projects and programmes manager at the DSE.

USE’s most popular stocks, Stanbic Bank Uganda — which is expected to release its half year performance in the coming weeks, and power distributor Umeme — which is expected to release its half year results soon, are expected to continue attracting investor interest.

Arthur Nsiko, a stockbroker and research analyst at African Alliance Uganda, said they expected subdued performance from Uganda’s banks.

He said about 70 per cent of bank incomes are generated from loans that have been affected by low growth in private sector credit. The other 30 per cent is from deposits, which have similarly suffered slow growth.

“However, the second half promises better results, based on reduced non-performing loans tied to the government’s initiative to clear all outstanding claims lodged by local contractors during the first quarter of 2013/14,” said Mr Nsiko.