Rwanda’s Stock Market falls by 69.6%

 

Brokers at the Rwanda Stock Exchange
Brokers at the Rwanda Stock Exchange

Rwanda stock market has experienced a fall in trading largely caused by effects of major global markets that continue to plunge.

According to statistics, the Rwanda stock market dropped by 69.6% in the first six months of 2016 compared to the same period in 2015.

“What is happening is we have many sellers and less buyers, and buyers dictate,” a junior staff at Rwanda Stock exchange said on condition of anonymity.

“There are specialized investors who look for what they call African risk and will decide in which country to invest in. When their markets suffer we obviously suffer, because  they pool back their money a bit,” said Andrew Otengo Owiny, Group Executive Director, MBEA Brokerage Services in an exclusive interview with KT Press on Friday.

Celestin Rwabukumba the RSE Chief Executive Officer explained that the fall was in volumes of equities trading not prices.  “The reason is very simple. Investors out there have not been buying much into equities most of the half year and those who are selling are mainly retail investors and not many are buying which causes prices to fall further.”

“2015 was the worst year selling 37% in share indices (local) because of all the issues that affected markets across the world especially African markets. Thus  first half of 2016 continued that trend.”

According to Rwabukumba  the opposite happened in the bonds markets where transactions have increased on the secondary market; “Investors have been playing the wait and see kind of game or buying into debt instruments.”

By June Rwanda stock market recorded total  turnovers  of  Rwf 9,000,419,660 (Rwf 9 billion) down  from  Rwf 29,728,606,300 (Rwf 29.7 bn) in the same period under review in  2015 with  a market capitalization  of Rwf 2.9 trillion in June 2016 compared to Rwf 2.8 trillion  in June , 2015.

“The global markets are also suffering and there is a trickle down into our market naturally,” Owiny said.

Rwanda’s stock exchange (RSE) is young with only three stocks and is largely dependent on liquidity for foreign investors who pulled back their money causing more sellers on the market against buyers, tilting the demand and supply balance.

The stock exchange established in 2011 has the bonds and Stocks market with only one local major investor- Rwanda Social Security Board-RSSB with Sizeable transactions from foreign investors.

Bralirwa and Bank of Kigali counters performed poorly. Bralirwa recorded turnovers of Rwf 1,458,946,400 (Rwf 1.4 billion) in June 2015 compared to 1,878,800(Rwf 1.8 million) in June 2016 while BK recorded total turnovers of Rwf  10,818,344,300 (Rwf 20.8 billion) in June 2015 compared to Rwf 567,807,200(Rwf 567 million) in June 2016.

Whilst Crystal Telecom Limited recorded turnover of Rwf 79,669,500 in June 2016 with no turnovers recorded in June 2015.

The cross listed counters of Kenya commercial bank, Nation Media group, Equity Bank , Uchumi Supermarket Limited did not  record any transaction  between June 2015 and June 2016.

Bralirwa’s profits were affected by prior year adjustment in production understated their production costs 2015. Bank of Kigali also showed less income which increased by about 1 percent.

However, the timing of Crystal Telecom Limited IPO wasn’t good, as Owiny says “the appetite wasn’t there, many people thought they would put in money and sell off, but there were no big boys (foreign investors).”

The stock exchange also, as experts say faced the growing appetite at the Nairobi stock Exchange and the opening of the Dar-el-Salaam stock Exchange to foreign investors and its four new Initial Public Offers-IPOs since 2015.

“They (foreign Investors) always ask how the capital markets are performing on the continent and we always look at which markets have higher appetite and advise accordingly,” a broker at Nairobi Stock Exchange whose brokerage firm represents key investors in the region’s stocks told KT Press.

Nonetheless, Rwanda’s growing  energy sector has attracted more investments since the first quarter of 2015, something that has seen foreign investors pumping in their money directly, rather than investing on the stocks.

The country under its long term strategy outlined to increase its energy output to 560 MW by 2018 which saw more concessions and agreements signed between government and international and local investors.

The exchange has 7 listed companies; Bralirwa, Bank of Kigali-BK, Crystal Telecom-CTL, Nation Media Group-NMG, Equity Bank, Kenya commercial bank-KCB and Uchumi Supermarket limited-USL. With two awaited companies I&M and KBS Bank soon to do their Initial Public Offer-IPO.

Accordingly, the market recorded increased volumes (number of shares trade) in the first half of the year totaling  520,631,200 volumes  in six months from 122,906,600 volumes  that were recorded  in the same period in 2015.

Economists however, say the low activity on the stock Exchange is not likely to affect the economy that is projected by Central bank to grow at 6.8 in 2016.




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