Friday, September 25, 2009


Is the National Insurance Corporation's long awaited IPO finally on! watch this space

Wednesday, September 23, 2009


The Uganda Stock Market is 11 years old this year with six primary listings of: Uganda Clays Limited, British American Tobacco, Bank of Baroda, Development Finance Corporation Uganda, New Vision Limited and Stanbic Bank Limited.
Currently the market is shrouded in the after effects of the: NSSF debacle, the Global crisis and Safaricom’s IPO aftermath.

On a lighter note the half year results so far released are defying the effect of the global crisis on the health of Ugandan listed companies with Stanbic Bank and DFCU each posting over 35% growth in half year profitability and over 405 in sales revenue.
The USE is due for Computerisation with the Securities Central depository system taking shape this means transactions will be automated making much faster and there will be no need for physical share certificates as there will be a centralized record of all shareholders and their respective shareholding.

Likely cycle (2009-2013)
We could witness share prices gaining a little in 2010 at the back of accumulated impressive results hence excellent Price Earning ratios (current share price compared to its earning power eg Stanbic is trading at 160 today and each share earns 15/= therefore PE= 10.6) in the ranges between 10-18.
However as the 2011 Elections draw closer these share price gains will be offset by the caution and uncertainty this brings along.
Regardless of the Elections outcome, my bet would be that the Uganda Stock Market shall have great year in 2013 as the election baggage fades away.

Share price movements: September 2007- September 2009.
Stock Current price 24 months 24 months
Symbol 09/09/2009 High Low

UCL 70 250 65

BATU 370 1,465 370

BOBU 380 1,160 375

DFCU 500 980 390

NVL 770 2,645 770

SBU 160 250 120

SAFCOM 3.65 Kshs 8.15 Kshs 2.5 Kshs
UCL- Uganda Clays Limited
BATU- British American Tobacco Uganda
BOBU-Bank of Baroda Uganda
DFCU- Development Finance Corporation of Uganda
NVL- New Vision Limited
SBU- Stanbic Bank Limited
SAFCOM- Safaricom Kenya

Is it a great time to buy?
At the moment the Stock market belongs exclusively to those investors willing and able to invest over a longer period of time not less than Four years reason being:
2011 Presidential elections
In my opinion the Nairobi Stock Market was mainly brought to its knees more by the Kibaki-Odinga power struggle than anything else.
Back home: with a potential formidable opposition like was the case in Kenya, I hate to write this but by ignoring the likelihood of a ‘Kenyan Election’ replica does not mean it will not happen here; clearly the battle lines are drawn so to speak (Read bafuruki, splitting kingdoms). If this happens the Stock market will be knocked off its rails like happened in Kenya.

Uganda Stock Market is going through its toughest darkest time thus far with its estranged Market Maker, NSSF, not buying a single Share since mid 2008 thereby starving her of the much needed demand in a market where price movements are determined by market forces of demand and supply.
No doubt the BUYERS PARADISE is on now.
As captured in a Malcom X quote;
“It is only after the deepest darkness that the greatest light can come”
Do investors have the nerve and foresight to take advantage of this Paradise?

Friday, July 10, 2009

MJ- no am still alive and Thrilled

Dear Readers'
My deep sincere apologies to all those who follow this blog;yeah have been away for long engaged in other projects. I cannot say fully back: but am around!
Thanks for all the Support, comments and people this is your blog as well write anything about the Stock Markets in East africa I shall publish your article.

Hah, if this IPO were a girl awaiting marriage she would have long gone in menopause before the actual marriage: in all honesty thats what NIC's IPO is, with a pinch of salt i read in the papers that they are coming on the 17th of July 2009; my foot!
Mark my words, i shall close this blog if they do.
Tentaively lets talk about the Last Quarter of the year 2009

A Broker suspended for 2 months and it is published in the Leading newspaper Dailies; i was abit taken aback, but knowing its for minimum capital requirements at Bank it did not surprise,
Uganda's Capital Markets Authority should have started on this (Public suspension) of brokers especially those involved in "real" unethical practices like creaming off the provident fund (NSSF). A typical case of remanding Chickhen thieves to Luzira Maximum prison and then Granting bail to the "Fat Cats".
My argument here is about the stinking Double Standards only.

NSSF Return
If you have ears you have probably heard about the meagre returns NSSF Uganda is going to offer to its savers of around 4% vis a vis the 14% embellished "Jamwa" ones.
Well Jamwa was undeniably a sort of saviour at the Uganda stock Market; shaking up the Investment Portfolio in Uganda equities from 5% to 30%, no doubt that ever since he left the Market has dearly missed.
There is talk that since he was a performer and is only serving his suspension we could see him back at the Monopoly Pension Fund.....

Cross-Listing of Kenya Commercial bank and Equity Bank
Two of Kenya's celebrated Banks were cross=listed here in Uganda. Not that am against the East African Community but sincerely when you come to look at this- Is it not Public Relations stunts (not withstanding the proposed East African Stock Exchange- which may need a single currency).
The cross listed companise now account for over 85% (7-07-09) of our market Capitalisation.
Imagine this: a Ten percent fall or rise in the Cross Listed Companies would result into a an exaggerated rise or fall on the Uganda Stock Market, which is not reflective of Trade in the primary Listings... I think this is misleading to those investors who track Indexes.

Thursday, March 12, 2009

Credit crunch: ‘Ugandanised’ Explanation.

A lot has been said about the raging credit crunch in mostly the Western Hemisphere, Star Traders’ puts some familiar names and scenarios to help its readership really understands this ‘thing’ that has taken on as the best excuse to explain cash matters be it by individuals or Corporations. Nice reading and please send your comments.

Nalongo is the proprietor of a bar in Luzira. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around and as a result increasing numbers of customers flood into Nalongo's bar.

Taking advantage of her customers' freedom from immediate payment constraints, Nalongo increases her prices for waragi and beer, the most-consumed beverages. Her sales volume increase massively.

A young and dynamic customer service consultant at the Luzira UCB bank branch, called Musoke, recognizes these customer debts as valuable future assets and increases Nalongo 's borrowing limit.

Musoke sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At UCB's corporate headquarters, expert bankers transform these customer assets into BELLBONDS,CLUBBONDS and WARAGIBONDS. These securities are then traded on securities markets in the East African Region. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a Risk Manager (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Nalongo 's bar.

However they cannot pay back the debts. Nalongo cannot fulfill her loan obligations to UCB and claims bankruptcy.

BELLBOND and WARAGIBOND drop in price by 95 %. WARAGIBOND performs better, stabilizing in price after dropping by 80 %.

The suppliers of Nalongo’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her waragi supplier claims bankruptcy, her beer supplier is taken over by a competitor.

UCB is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties (and vested interests).

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Finally an explanation we can understand...

Thanks to Watmon Mike Kinyera for original forwarded message.

Wednesday, February 25, 2009

Policy Options: Mutebile’s high interest rates now ridiculous

Bank of Uganda has successively increased its lending rates in Uganda since the third quarter of 2008. When the Central Bank started increasing the rates, Uganda was registering record high inflation rates, and the upward swing in interest rates was warranted.

Last month, the central bank further increased its bank rate to commercial banks from 17.20 to 18.42 per cent. Consequently, banks like DFCU and Barclays adjusted their lending rates above 19 per cent per annum citing high costs of borrowing in the market -which makes sense.

To the ordinary Ugandans who borrow from these banks it means that they now have to pay higher charges on loans compared to the past months. With the ‘madness’ among commercial banks, rates will shift from the 16-27 per cent bracket, to that of 19-35 per cent. I know, the Central Bank is convinced that the high interest rates will mop up the “excess liquidity” and eventually translate into single digit inflation, in a bid to achieve price stability and a sound economy but, should it come at the expense of growth during a downturn?

When BoU was increasing the cost of borrowing last year, most global central banks like the European Central Bank and Federal Reserve were doing the same –it made sense. Most nations were aiming at reducing the high inflation that emanated from very high food and fuel prices. This was because China and India, the fastest emerging powers of Asia were buying too much of everything and the impact of their demand was felt worldwide.

In September, what many non-Americans thought was a United States’ mortgage crisis turned out to be a global financial crisis. A month later it was obvious the crisis was spreading like the Australian bush fires instantly burning stock markets, and exchange rates yet remittances were nearing their worst decline. Mr Emmanuel Mutebile, the Governor BoU took some steps to rescue our weakened shilling.

Together with Ex-Finance Minister Mr Ezra Suruma, they further painted a grimmer picture of 2009 remittances, Foreign Direct Investment (FDI) and donor aid. To my surprise, the prophets of doom have stuck to the rigid principles of macro-economics to overcome the ripple effects of the recession in the West and our national slowdown. Yet, the founding fathers of capitalism are reversing their doctrines to address the commotion in their economies.

Clearly now is not the time to fight inflation by hiking interest rates, as Mr Mutebile is doing. Globally, Uganda now seems to be alone on this battle front. Mr Mutebile knows high rates undercut the amount of credit/money people can access. He also knows that in the next weeks and months, FDI, remittances, tax revenue and companies’ earnings will dwindle.

What this means is that there’s going to be less cash available to Ugandans to spend. But the Central Bank is now making it harder for many poor Ugandans to access cash by making it more costly and -stubbornly keeping it in the hands of a few. So, it’s not by accident that banks now prefer to venture into petty products like school fees loans for cash-strapped parents.

We should know that sticking to text-book economics in these tough times is fiscal suicide. BoU should for a while shelve the catastrophic philosophy of economics and consider thinking outside the box. Now is the right time to ease rates to place cash in the hands of more people to stimulate investment by locals, to create more jobs and spur the economy into positive growth.

Our 2009 GDP growth rate has been revised to about 7.4 from about 8.9 per cent last Financial Year. That’s a contraction of 1.5 per cent, with such a decline, Mutebile should instead focus on cutting lending interest rates by over 1.5 per cent and transfer the high rates to government securities, to woe buyers. It doesn’t seem sound for a central bank to worry about high inflation when fuel and some food prices that sparked off abnormal inflation rates are now easing?

To mop up “the high liquidity”, as a nation, we need to halt our unnecessary external borrowing, reduce public administration costs especially the fuel and communication bills by utilizing Dr. Ham-Mulira’s e-government project to attend meetings, and limit the amount of food exports to Sudan among others. It is also important that government starts sensitizing Ugandans about the economic slow down and advise them to reduce their unnecessary expenses and increase their sources of finance.

For a government that will not unlock even a million dollars as an economic stimulus package to strengthen its economy these are options.

Walter Wafula
Walter is a Ugandan Journalist.
+256 773 459765.

Bank of Uganda reversed its decision on the increased Bank rate of 18% (probably this article was part of the pressure), the current Bank rate is 15%.
Thank you.

Monday, February 16, 2009