The East Africa 15 (EA15) highlights on 15 of the most traded and highly capitalized stocks in the region on a monthly basis. The primary purpose of the EA15 is to give investors a description and perspective of the regional stock markets’ performance.
EAC countries’ economies had a turbulent time in 2019 characterized by rising public debt against missed revenue targets,slow private sector growth and under-par performance of traditional key sectors of the economy such as tourism, agriculture and manufacturing. Further, regional trade which was earmarked as crucial to economic development has been marred by trade spatssuch as protectionism resulting in a decline involume and value of intra-regional trade.
The region is looking to maintain a loose monetary stance to boost private sector growth and more importantly,resolve disputes in order to intensify regional trade. Despite the tough economic environment, the region’s GDP is projected to grow the fastest in sub-Saharan Africa by about 6% compared to an average of 3.6% for the continent.
Kenya: Nairobi Securities Exchange (NSE)
In a move to draw the informal sector into the tax bracket and increase domestic revenue collection, the Kenyan taxman re-introduced the3%Turnover Tax (ToT) for businesses whose annual turnover does not exceed US$50,000 and that are not registered for Value Added Tax (VAT). The tax will be up and above the recently introduced Presumptive Tax charged at 15% of payable annual business permit or trade license. However, since the presumptive tax is paid in advance, it will be used to offset the ToT payable. The ToT is seen as an effective system to ensure the tax burden is shared equally as well as simplifying compliance for SMEs as itis a final tax.
The monetary policy committee was expected to review the Central Bank Rate by the end of January currently based at 8.50%. The last review in November was the first time in 16 months a change occurred from the previously held 9%. The loose monetary stancemay to some extent, be attributed to the improving private sector credit growth. This, coupled with the repealed interest rate capping law is likely to increase liquidity in the market in an economy deemed to be performing at less than its potential.
The Kenya shilling has weathered pressure remaining strong against the US dollar on diaspora remittances and increased foreign participation at the NSE. In the month under review, theshilling averagedat Ksh101.1 against the US dollar with highs of Ksh100.7 marked. Liquidity improved month-on-month as interbank averaged at 4.9%. Short-term debt was relatively unchanged as the 91-day, 182-day and 364-day T-bills averaged at 7.2%, 8.1% and 9.8% respectively.
NSE reached another milestone with the listing of the first green bond valued at US$42.6Mn. The debt instruments for funding climate and environmentally friendly projectswere jointly issued by Acorn Holdings and Helios and cross-listed on the London Stock Exchange.
The All-Share and blue-chip indicesinchedhigherby 1.49% and 3.22% respectively. On the losing end were KCB (-2.35%), Equity Bank (-2.36%), and NMG (-4.66%), driven by selling pressuresas investors recouped gains. DTB 99.01%), EABL (7.42%)and Jubilee (5.57%) topped the gainers board for the period. Full financial sector results for 2019 will start trickling in this month hence an upbeat market is anticipated.
Tanzania: Dar es Salaam Stock Exchange (DSE)
The government has offered to liaise with local banks in supporting local companies to sign large-scale infrastructural projects that are predominantly won by foreign companies, on the back of their capital muscle and technical expertise. Cost of credit is high in Tanzania with interest rates averaging at 22% p.a. Collaboration of government with local financial institutions such as CRDB which is at the forefront, is expected to lower the cost of credit and boost private sector credit growth and hence spur economic development.
Tanzania hasretained a loose monetary position to improve economic growth through private sector credit expansion in addition to liquidity injection in the market. On other macroeconomic factors, the Tanzanian shilling has maintained stability exchanging at an average of TZS 2300 for the past month.
Annual inflation has been relatively steady and on the lower side; January rate was unchanged from December’s 3.8% despite a slight appreciation in food-related price indices.Short-term government debt instruments saw three, six- and 12-month T-bills averaging at 4.0%, 4.38% and 5.9% respectively.
The DSE indexincreased by 1.88% while the local index,TSI, edged up by 0.15%as most local counters’ price remained unchanged. CRDB was the only gainer by 5.6% over the period. Activity was high among the financial players stocks though in low volumes.
Uganda:Uganda Securities Exchange (USE)
In the past year, the government has intensified investment and focussed on the revival of the country’s airline which resumed commercial operation in August last year. The resurgence of Uganda Airlines is a boost for the tourism industry contribution to the GDP, regional trade as well as creating much-needed employment.
Uganda has maintained an accommodative monetary position with the CBR rate held at 9.0% since October 2019. The stance is expected to keep inflation in check, bring stability in lending rates and support private sector growth. A review of the policy is scheduled this month with the market anticipating status quo.
The Ugandan shilling held a firm grip against the US dollar over the period under review recording marginal gains on notable offshore inflows.Annual headline inflationin January averaged at 3.6% on steady riseof food and beverage prices compared to 3% in December 2019. Short term interest ratesfor the period averaged at 8.9%, 10.5% and 11.0% for the 91-day, 182-day and364-day T-bill respectively.
The All Share Index increased by 1.03% while the local indicator was up 2.72%. Month-on-month, Stanbic Bank of Uganda (SBU) recorded the highest appreciation of 8.7% followed by National Insurance Corporation (NIC) at 5.00% whileUmeme edged up by 0.86%. DFCU and Uganda Clay Limited (UCL) remained unchanged as Cipla Quality Chemical Industries Limited (CQCIL) declined by -15.00%.
Rwanda Stock Exchange (RSE)
According to the IMF, Rwanda’s GDP is expected to grow by 8% this year, compared to 8.5% forecast for 2019. Sustained private sector investment, enhanced regional trade and construction projects are the main drivers.
The country is also looking to bring more taxpayers in the bracket in order to increase revenue collection and ease public debt. Besides, the government is keen on private sector development, so as to shift to a private sector-led economic growth from the current public investment-led one.
The National Bank of Rwanda has kept monetary policy unchanged at 5.0% on low and stable inflation; and modest pressures on the exchange rate. The policy rate is expected to encourage and support credit growth to the private sector which grew by about 8.2% last year as average commercial lending rate declined to an average of 18% to 16%.
The Rwandan franc weakened by 0.8% against the US dollar to average at Rwf923.23 from Rwf919.33. Interest rates have maintained a steady pace with an average of 5.1%, 6.5% and 6.8%for the three, six- and 12-month treasury bills supported by the accommodative monetary policy stance.
Valuation indices sent mixed signals. All Share Index was up 11.37% attributed to the improved performance of cross-listed stocks i.e. KCB and Equity. The RSI indicator which gauges performance of local companies lost ground by -1.21%. Bank of Kigali shares shed -2.26% while the rest of the stocks were unmoved.
|Country||Stock||1/20/19||12/20/19||MoM%||ROE %||P/E||PBV||Div Yield %|
|TT-Total Turnover, MoM%-Month on Month change, ROE-Return on Equity, P/E-Price to Earnings, P/BV-Price to Book Value, Div Yield- Dividend Yield, *price in local currency|
Source: NSE, DSE, USE, RSE
By Virginia Wairimu