Wednesday, May 12, 2010


Pix: Opiai rock commonly known as Moru Apesur (Rock of Girls) as seen from Soroti town, Muhimbise,April 2010.

In her efforts to pursue technology reforms,the Uganda Securities Exchange is increasingly finding herself between a rock and a hard place in this crucial time of their top executive succession from the founding CEO concluding in June 2010.

Stanbic Bank’s counter has not traded a single share on the Uganda Stock Market since the immobilsation exercise of its shares took effect on the 3rd May 2010, ironically bringing to a standstill trade in by far the most liquid counter on Uganda’s only Stock Market, and accounting for more than 60% trade on any given trading day. This Immobilisation exercise is being supervised by the Uganda Securities Exchange.

USE advertised an ultimatum in the mass media (below), in a clear show of frustration at the snail pace of investor reception akin to civil disobedience of the share immobilisation exercise, on the Stanbic Bank Uganda Limited shares.

USE Ultimatum
"All Shareholders with Stanbic Bank Uganda are notified that immobilisation date is 29th, April, 2010 and that with effect from 3rd May 2010 no person shall trade on the Uganda Securities Exchange in the said shares unless such a person shall have successfully opened an account with the Securities Central Depository (SCD) and deposited such shares in such accounts".

Is ongoing exercise where share ownership on Uganda’s Stock Market is being moved from paper form to electronic form to necessitate Technology reforms on the Stock Exchange, It is being supervised and implemented by the Uganda Securities Exchange and SCD Agents respectively.

To trade in Stanbic shares; a buyer must have an SCD account and a seller must have opened an SCD account as well and handed in their certificate to be converted from paper to electronic record form, short of this you cannot either buy or sell shares on the Stanbic Bank counter.
Five days ago a colleague from Fidelity mailed me asking and I quote; “What happened to the SBU shares? After immobilisation how come it’s stopped trading?” Initially I shrugged it off as one of those common cycles, alas I was so wrong and inattentive; apologies to the other Star Traders’.
When you piece together some events, notably the 240/= trade that rested Stanbic’s price at 226/= for the day (20th April 2010) moving 1,820,518 shares just days before the ultimatum deadline.


You can say it is early days- only five trading days after immobilisation with zero shares traded in the affected stock, but this could be tough for the Stock Exchange as long as they are not willing to change their approach of getting investors to immobilize and this is why;

Investors have not fully comprehended this ‘thing’ as its understanding is covered in a lot of jargon and financial world speak; SCD,CDS, immobilization and alike.
The USE not so long ago had an excellent and practical plan called the; BOURSE GAME, which would enable learning and appreciation of these technology reforms in a practical manner, what happened? A lack of money to implement is a lame excuse, may be a lack initiative.

KENYAN and Sophisticated Ugandan RETAIL INVESTORS
At Stanbic’s IPO over half of the 30,000 investors that took part were from Kenyan, though many have sold out they are still a block of investors to reckon with especially in immobilizing Stanbic Bank’s shares.
Some of the investors like Star Traders’ are not convinced of the Independence of this SCD system yet; how can the Uganda Securities Exchange manage this system surely there is major Conflict of Interest- on the outside they could have good intentions but on the inside they may not be I position to crack the whip, incase of market misbehavior, on one of their own for purposes of market integrity
These are a more battle hardened investor from their NSE dealings, and their reluctance could be to avoid a of de ja vu; as regards past experience with their brokers freely trading with their ‘Electronically’ held shares, this Kenyan sentiment is reflected in this paragraph adopted from a yet to be published Star Traders’ article titled: IS THE UGANDA RUSHING INTO TECHNOLOGY REFORMS

“USE vis a vis SCD
Conflict Of Interest occurs when an organisation is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other; the USE is the market platform, the USE is in lay terms ‘owned or to an extent controlled’ by the brokers and the USE is going to manage the SCD system in-house on which system the same brokers will operate; the brokers are not some kind of saints whom the opportunity to acts ‘undetected’ greed does not appeal to; NSSF Uganda can testify.

This kind of self policing is convenient in the short-term but shortsighted in the long-term
Like say, if there is wrong doing, it may be intent of USE in short-term, like happened at NSE, to eliminate the appearance of unethical behaviour rather than the behaviour itself by keeping any unethical breaches hidden, instead of exposing and correcting them what you may call Keeping intact the Market Integrity.
What if brokers tinker with shares on the SCD account can we trust them to take appropriate action?”

Past experience dealing with immobilized shares, traditionally Ugandan investors have been used to owning and trading physical certificates and their first encounter with owning Electronic shares is like a dark cloud hanging over this Financial industry, it is called SAFARICOM we believe there is no need for further elaboration here. Any way this brings in the fact that you are dealing with cautious investors


Borrowing Stanbic Bank’s new slogan, WE NEED TO MOVE FORWARD and Star Traders’ panel has compiled what can practically be done especially to the more complex and numerically superior class of investors: RETAIL investors.

Tone down on threats, this ultimatum was interpreted by one of our readers as
“As though they are giving Investors’ Amnesty” (read: LRA vis a vis Amnesty) all the benefits mentioned accrue to the brokers and the USE, no effort is taken to explain to investors what good these Orders bring to them; hence providing zero incentive other than being barred from trade in Stanbic shares.
USE could instead adopt the soft power of persuasion, which is the ability to attract without the use of force or payment, Uganda Clays Ltd has successfully done it twice when it recalled certificates to incorporate splits even Baroda has done it; certainly there is a precedent.
Task: identify benefits and communicate them in convincing and more cordial way.

Kenyan investors, Dyer & Blair and African Alliance hold the key that may unlock this hurdle. But they have to be assured there will be no repeat of NSE money circus, considering now that they are even further.
Task: go get the key from D&B and AA.

We cannot tell USE’s exact approach to this exercise but from the outside it seems they are going Solo-this is suicidal, why? Honestly from talking to a number of retail investors we realized that they listen more to their listed Company officials than the USE (market) and CMA (regulator) combined, therefore Mr Wafula, Mr Kisaame or Mr Odera could do a better job immobilising than the issued ultimatums.
Star Traders’ recommends USE visibly involves; the listed Companies (UCL, BATU, BOBU, DFCU, NVL, SBU, NIC), the Brokers (who have the most to lose, judging from the ongoing over bidding post Stanbic immobilisation) and the regulator (CMA); issues of ego and small fights should be cast aside for this to work, no investor will hold on to their certificate if all these were to be visible in the exercise.
Task: concerted effort with the CEOs of listed companies urging their respective shareholders to immobilize.

Every dark cloud has a silver lining; in this case the artificially created dark cloud over Stanbic Bank counter which has traded no single share Five trading days post-immobilisation compared to 5,675,963 shares traded five days pre-immobilisation.
The silver lining is manifested in the form of pushing attention to the other Banking counters especially Bank Of Baroda Uganda whose price has appreciated from 290 to 450 in the same period.
I believe Uganda Securities Exchange will embark on some of these recommendations, All the best.

To get a copy of: THE FACTS OF THE FIGURES,
Star Traders' has compiled trading figures of all Ugandan listed banking Institutions namely; Stanbic, DFCU and Baroda spread over; covering 5 trading days before and after Immobilisation of trade in Stanbic Bank shares to assess any impact.