Uganda Securities Exchange hit by high interest rates on government securities, says report
Turnover in Q3 2015 was lower than over the same period last year.High interest rates charged on government securities have led to a decline in equity performance at Uganda Securities Exchange in the third quarter of 2015 compared with the same period last year, according to a new report from financial services firm UAP.
Turnover in the third quarter of 2015 was Sh36.6 billion (€10.2 million), compared to Sh42.8 billion over the same period last year.
The report states that the tight monetary policy recently implemented by the Bank of Uganda has caused interest rates on government securities to soar.
Edgar Mutebi, an analyst at UAP Financial Services, told the East African that fund managers consider it safer to invest in fixed income segments where the rates are high, rather take a gamble in the equity markets where the share prices are static.
"The second reason [for the decline in equity performance] is the valuation of some company shares; for instance, the DFCU shares are at the moment overvalued while for the case of Stanbic Bank Uganda there is low demand for its shares, leading to a decline in price," he said.
Foreign investor interest in Uganda has risen in recent years as the East African nation prepares to begin crude oil production in 2018.
The country's stock-exchange currently has 16 companies listed, with a market capitalisation of $9.4 billion.