The total market capitalisation of firms listed at the Uganda Securities Exchange fell to Ush4.27 trillion ($1.15 billion) in 2019/20, from Ush4.91 trillion ($1.32 billion) in 2018/19.
According to Capital Markets Authority report, the drop was driven by substantial declines in share prices of locally listed companies, a trend that was escalated by the Covid-19 outbreak.
Cost-cutting and a fast growing digital wave to containing spread of Covid-19 currently sweeping through many sectors are also weighing down on the capital markets.
Data indicates that share prices of Uganda Clays Ltd, Cipla Quality Chemicals Industries Ltd, NIC Holdings Ltd and Stanbic Holdings Ltd fell by 40.55 per cent, 37.5 per cent, 30.77 per cent and 17.24 per cent respectively, between July 2019 and June 2020.
Consequently, the USE’s All Share Index declined from 1,614.82 points in 2018/19 to 1,369.84 points in 2019/20, the recent data shows.
The capital markets industry’s consolidated profit after tax dropped to Ush1.2 billion ($322,939) in 2019/20, from Ush1.6 billion ($430,585) in 2018/19. Total costs incurred by capital markets industry players rose to Ush14.5 billion ($3.9 million) in 2019/20 from Ush13.7 billion ($3.69 million) in 2018/19.
In contrast, total assets held by Collective Investment Schemes (CIS) also referred to as unit trust funds grew to Ush388.5 billion ($104.6 million) in 2019/20, from Ush173.5 billion ($46.7 million) in 2018/19. Total revenues generated by capital markets industry players increased to Ush16.4 billion ($4.4 million) in 2019/20, from Ush14.2 billion ($3.8 million) in 2018/19 the report says.
Fund managers accounted for 43 per cent of overall industry revenue followed by stockbrokers and dealers with a 38 per cent share. The USE registered an 18 per cent share of total industry revenues while investment advisors recorded a share of 0.8 per cent during the period under review.
“Going digital in the Covid-19 era has helped us cut electricity bills and office printing costs. Though we still come to office, most of our meetings are held virtually needing less printed documents. Some services have been outsourced to the Nairobi office reduced the workload on our side. We have digitised almost 90 per cent of our operations to date, but the idea of shared work platform that interconnects us and our service providers is not feasible because some players have divergent digitisation benchmarks in their systems. We have experienced less austerity pressures during lockdown because we run a lean operation,” said Mubbale Kabandamawa Mugalya, Investment Manager at Sanlam Investments East Africa Ltd, a pension scheme and unit trust fund manager.
“Equity markets are likely to come under pressure from muted participation by domestic and offshore investors due to the economic uncertainty generated by the Covid-19 pandemic,” he added.