East African Business Week

Kampala, Uganda —  As inflationary pressures and depreciating shilling affected local investors on the Uganda Securities Exchange (USE) however a third quarter report shows that foreign investors capitalized on these events to trade on the bourse. The activity of foreign investors also boosted the performance of the USE with a better performance compared to the previous quarters.
"The equities segment reported increased performance compared to the previous quarters activity," reads the report.
In Q3, total turnover rose to Ushs9.5bn ($3.6m) up from Ushs6.5bn ($2.4m) in Q2 of 2011. There was also a significant increase in the volume of shares traded from 25.7 million in Q2 to 46.1million in Q3 which is an increase of about 79.3%.
"The inflation and exchange rates continued to motivate investor participation in the market," the USE Q3 report continues to read.
Stanbic Bank once again dominated trading activity on the bourse with about Ushs3.7bn ($1.4m) or 39.7% of the total turnover. It was followed by Bank of Baroda at Ushs3.2bn ($1.2m) or 34.7%. Uganda's top media company New Vision took up 15.3%, DFCU Bank 6.3% whereas Uganda Clays, NIC and British American Tobacco combined were just below 4% of the total turnover.
In the third quarter, August was particularly impressive as it registered a turnover of about Ushs4.8bn ($1.8m) with 418 deals recorded, and a daily average turnover of Ushs222.4m ($86,000). July and August recorded Ushs2.2b ($844,000) and Ushs2.3b ($883,000) turnover as total turnover.
However, the all share index at the bourse has been dropping over the last 12months after a major 2010 recovery. The All Share Index in July plummeted to 1,084.23 before finally settling at 1,024.47 by the end of the month. In August the index slowed to 977.24 points and slumped further to 879.09 in September
"The Local Company Index however maintained a steady outlook with the index levels fluctuating between 279 and 258 before closing at 257.1," the report adds.
In the fixed income securities market, the government bonds turnover dropped to Ushs133bn ($51m) from Ushs192bn ($73m) in the previous quarter.
Brokers and market analysts however say that the market is likely to slowdown in the final quarter of the year considering the inactivity they encountered in October and November. What appears to be more of the threat to increased turnover, is the increased yields on government securities. The 91day, 182day and 364day treasury bills were attracting yields of about 21% which has driven foreign investors to more lucrative returns in the secondary market.
"The average yields on government securities witnessed an increase amidst the tight monetary policy that Bank of Uganda adopted at the beginning of the year. Market analysts predict the increase in yields may reflect high inflation expectations going forward," the report notes.