Friday, December 12, 2008

Impact of share price fall on Business community

Share traders'

These are classified into two depending on how long they hold onto the stocks they buy:


these have a long-term outlook when they invest in shares here the typical example for our case is the provident fund NSSF and corporate investors.

The impact here is that their portfolio holdings value has contracted (some of NSSF's record earnings of the other year has been reduced) in the short to medium term however on a more positive note there is a sizeable supply of reasonably priced shares.


these invest for short-term and usually need their money back for other needs within a year. In my view these are the hardest hit of all stakeholders: they came in to make money which by the way they did and are still in the positive, but it was way below their exaggerated expectations, these were mainly ushered in after the mammoth (Uganda standard) Stanbic IPO and are now in stampede selling to salvage their remaining returns,

The negative impact is that they have lost 'imaginary' money vis a vis their expected returns and this kind of industry issues like this count- more like a fall in confidence as regards the Stock Market.

Brokerage firms, Uganda Stock Market and Capital Markets Authority

These are the middlemen of the Stock Market nothing happens without their input, they earn off statutory commissions shared amongst them, the Uganda Stock Exchange and the Capital Markets Authority (CMA).

The negative impact is primarily the crisis of confidence gripping share traders' (investors and speculators) then revenues as turnover has nose dived but most of them are either desk offices mainly in banks or subsidiaries of established Brokerage houses and I believe they have alternate sources of income, besides I highly doubt we shall see pre-Stanbic IPO turnover where they survived for over 6 years.

The positive impact has to do with one of my favourite quotes from:

Malcom X "It is only after the deepest darkness that the greatest light can come" this is an opportunity for all the tier one industry players (Brokers, Stock Market and CMA) to bring in as many Investor in the market.

Listed and soon to be Listed Companies

The Publicly listed companies which are six in total have been impacted on perception; especially when share traders' hear of bigger companies in the western world being bailed out there is this misgiving on the heath and operations of a company operating in the third world.

The other impact of this bearish run could be on the ability to raise funds on the market through IPO, rights issue (like NVL did in July), lisiting of Corporate bonds. Let me use the National Insurance Corporation long awaited IPO could have been pushed further fearing the backlash of an under subscription like recently happened to the Co-operative Bank in Kenya where Subscription was 70% (meager considering East Africa recent listings).

The beatiful Lake Bunyonyi found in South Western Uganda, Kabale district
At 900metres deep its second to Lake Tanganyika in Africa.
Can shares in Uganda reach thet depth? I do not know for sure.

Star Trader