Uganda: Panic As Stocks Lose

Source from:  East African Business Week (Kampala) 25 October 2008 10/28/2008

All the listed companies at the Uganda Securities Exchange suffered losses by the close of businesses last week except the British American Tobacco Uganda (BATU) which did not trade, indicating for the first time that perhaps the financial meltdown in the US is trickling into Uganda's financial sector already. "The market has closed the week in the red with all counters losing in pricing, save for BATU that did not trade today," read a trade report in Kampala. It is the first free-fall of shares in many months coming on the back of an early year boom and vibrancy with the entrance of Safaricom Ltd on the local menu of investment options. But as the world battles uncertainties sparked by the U.S. financial crisis, it appears that the local markets are now getting the knock-on effects and the real ripples are now being felt down here, at least on the stock exchange by the close of business last week. Brace yourself! It is time to lose or time to invest for a future gain for "bargain hunters may soon find their arms full of cheaper stocks in the days ahead." For weeks, Uganda government bureaucrats have down played the possibility of Uganda suffering the consequences of the U.S. cramp, saying it would be little felt. But if the capital markets are the new engines of local resource and capital mobilization for investment and growth, then there is a real need to be concerned, for indications are that they are probably the first victims of the global financial crisis which unjustifiably was not started in Uganda or Africa. Top industry sources say that as a strategy not to cause total public panic that can spiral a mass uproar and a spirit of uncertainty amongst the population, authorities everywhere prefer not to divulge the full extent the damage that the economy and markets are going through. "It is a very serious matter and no one knows upto what extent this will end, because some information is kept away from the public to avoid a complete panic," said a top financial expert. Last week, Uganda's finance minister, Mr. Ezra Suruma was quoted cautioning leaders against alarming the public. "We should be cautious when commenting about the financial system," said Suruma in the wake of a serious fall in value by the Uganda shilling against the U.S. dollar. As counters shed off value in the final trading session of last week, it was evident that even the most robust counters are now feeling the pinch. The total market capitalisation dipped to Ush4, 973.3 billion, down almost 5% from the previous figure in a day characterized by bearish sentiments across all counters. "It is clearly a buyers' market, with all the panic selling that is going on," read a statement from African Alliance Kampala. While there appears a relative calm on the buyer's side, experts believe that reduced retail and institutional buy-side activity could sustain the slow market performance. Stanbic Bank Uganda Limited (SBU) a star performer and the most liquid counter in the close to two years of transaction lost close to 16%, settling at Ush165 while Uganda Clays Limited , the most valuable stock at the USE was last week's second major loser with a 13.2% downturn to Ush160, according to reports. Bank of Baroda Uganda dropped 2.73% (Ush30) to close at Ush1,070 with 3,470 shares traded at a high of Ush1,075 and a low of Ush1,070. With a total of 457 shares traded in New Vision Limited (NVL), the counter dropped 1.60% (Ush30) to close at Ush1, 850. Turnover was Ush845, 450. "We expect UCL, NVL and BOBU particularly the latter two to lose some ground on the back of mounting supply from desperate sellers. SBU and DFCU could hold steady for sometime with limited supply sustaining current price levels," said MBEA, another brokerage firm in Kampala. Experts also predict that NVL and BOBU could be the hardest hit in the coming weeks as these two counters have the largest supply and strongly advise potential investors to consider bargains on these counters as prices continue to fall. "Those who already have these stocks and bought them at higher prices must consider buying more at lower prices to improve their average. The two companies have very good underlying fundamentals," advised MBEA. As things are, it is prudent to closely watch procedures at the nascent market (USE). Enditem