NAIROBI, Kenya, Jul 8 – East African stock markets recorded a depressed performance in 2018, according to the Alpha Investor’s market report.
The report attributes the performance to factors that include a global wave of emerging markets sell-offs in shares and currencies and the raising of interest rates by the US federal reserve, further strengthening the dollar.
In Kenya, profit warnings from listed companies and post-election inertia contributed to capital flight from the stock market.
In Uganda, dull trading activity and a slight devaluation in the Ugandan shilling further discouraged investments in the country.
In Tanzania, price volatility on some counters led to declining participation by foreign investors who contribute about 80 percent of the market’s liquidity.
Challenges facing the stock markets
Low liquidity levels are the major challenge facing East African stock markets, with bourses dominated by few blue-chip companies.
This is according to the Alpha Investor’s market report, which was commissioned by I&M Burbidge capital, the East Africa Private Equity Venture Capital Association.
In Kenya, the low levels are partly attributable to stringent listing requirements that have discouraged potential issues from the bourse, and high costs associated with listing that offset any potential tax benefits to a company.
However, the Capital Markets Authority is undertaking several initiatives to attract companies to list on the NSE, based on the CMA strategic plan 2018-2023.
Additionally, the NSE launched the Ibuka incubation and acceleration program, which will host select Kenyan companies on a 10-month course aimed at providing them with access to financial advisors and local and international investors and will also enable them to enhance their business structure as they prepare for their next phase of growth.