Kampala- Share prices for different counters at the Uganda Securities Exchange (USE) have suffered declines with Umeme and Cipla being the worst hit.

Cipla, which listed on the exchange after a successful initial public offering in August, has registered a massive decline falling below the IPO price of Shs256.5.
The stock, according to USE data, opened yesterday at Shs190 before falling further to close the day at Shs170.

Similarly, the Umeme counter has suffered a lot of price volatility in the last three years falling from Shs528 in 2016 to Shs300.
The stock yesterday closed at a flat rate of Shs300.
Mr Andrew Mwima, the USE trade manager, yesterday told Daily Monitor, the decline has not been unique to any counter, adding the trend could be a problem of flight from equity markets by regional investors.

“There was [at the close of 2018] regional flight from equity investments by foreign institutional investors who account for more than 70 per cent of trading activity,” he said, adding this could as well as explain why most cross listed counters have seen a drop in share prices.

However, he also attributed the decline to increased supply of shares during the festive season as many investors looked for liquid cash in the period.
“Many [investors] sold off their shares at depressed prices to meet expenses associated with the festive season,” he said.

Cross listed counters also suffered massive drops with Uchumi losing by -81.56 per cent. Kenyan Airways lost by -47.24 per cent while NMG dropped by -37.39 per cent. Centum registered a drop of -35.99 per cent by the close of the year.

At least 12 of the 17 listed companies have seen share price drops in 2018 while four counters have registered advanced price and one stayed flat.
“Most listed companies shed a significant percentage of their market capitalisations, a key metric used to determine the size of a company trading on secondary stock markets. The drops in share prices were attributed to a number of factors; most notably the traditional forces of demand and supply with supply overwhelming demand most of the year,” Mr Mwima said.

The price drops will impact shareholders as those who will choose to dispose of their stock, will either sell at a flat rate or at a loss.

Movements in stock markets can also cause a negative impact on the economy and individual consumers.

This is because a fall or collapse in share prices can cause widespread economic disruption at micro (household income) and macroeconomic levels.
In January alone some counters have experienced price drops of more than Shs50 while others have registered a minimal fall of between Shs2 and Shs5.

The drop has seen the USE total market capitalisation fall to Shs22.5 trillion from a high of about Shs24 trillion.

Mr Joseph Kibuuka, the Crested Capital head of compliance, on Wednesday, said there was no serious fundamentals for the fall in share prices other than forces of demand and supply.

However, he said the low level of investor participation in the market at the beginning of the year could also be causing the drop.

“Usually in the months of December and January there is always very low activity. It is still very early … the market will pick up as the year progresses,” he said.

Mr Emmanuel Katongole, the Cipla executive chairman, told Daily Monitor on Wednesday that what is happening is temporarily and it is not unique to Cipla.
“If you look at price structures not only in Uganda, equity prices have dropped in the recent past. At the USE all other companies are not any better ... so it is not Cipla alone,” he said.

However, available data indicates that international stocks such as the US have rebounded coming on the back renewed trade talks between the US and China.

Low participation

According to Mr William Nyakatora, the Kinsma Advisory Services executive director, the low participation from foreign investors could be affecting equity markets in Uganda.

“Over the last one year foreign investment has not been robust in Uganda’s capital market this has also contributed to low prices equity prices,” he said, linking the low participation to low level of competitiveness in the global economy.

Currently, he said, there are few retail and institutional investors participating in the stock market, which partly explains the fall in prices.

Globally, the International Monetary Fund, says over the past six months, global financial conditions have marginally tightened and the divergence between advanced and emerging market economies has grown.

Mr Nyakatora said in Uganda most people keep away from equity markets, which explains the low participation and the need for foreign investors.
“Besides that, the strengthening of the US dollar has impacted equity prices in Uganda’s stock market,” he said.