Single stock deal worry analysts

By Noel Wandera
Thursday, September 24th, 2020
EAC Capital Markets Infrastructure.
In summary
    • The EAC CMI is a $26.18 million (Sh2.83 billion) World Bank sponsored project with an objective of integrating the regional financial sector, ahead of the implementation of the single currency regime that is to come to effect in 2024.
    • Albert Bwire, a finance lecturer at the United States International University said it was in the interest of Tanzania, Uganda and Rwanda to come together since their stock markets are still infancy.

Considered East Africa’s financial hub, Kenya’s absence when Tanzania, Uganda and Rwanda formed a single trading platform for their securities markets, did not go unnoticed.

Analysts reckon the three member states of the East African Community (EAC) collapse of trading into the EAC Capital Markets Infrastructure (CMI) information technology platform smacks of a systemic geo-economics isolation.

“Clearly the announcement speaks to a geo-economic alignment between Uganda, Tanzania and Rwanda and a concomitant misalignment between those three and Kenya,” said Aly Khan Satchu, an independent financial analyst.

Satchu says the announcement should be viewed from the kaleidoscope of a sequence of announcements - a reference to the recent signing of an 1,445 km $3.5 billion (Sh 379 billion) oil pipeline agreement between Tanzania and Uganda - connecting Uganda’s oilfields to Tanzania’s port of Tanga.

The financial markets expert warned that though Kenya’s capital market remains the centre of gravity for the East African region, it would be a mistake to assume the economic undercurrents being exhibited by her neighbours.

“Kenyans might argue that the combined market cap of these markets is insignificant, and trading volumes small, but i think that would be a mistake.

You get a better idea by adding up GDP which informs you of the potential of such a tie up,” he said.

Kenya’s market capitalisation stands at 57 per cent followed by Tanzania at 19 per cent, Uganda with 14 per cent and Rwanda at 10 per cent in the region’s Sh34.7 billion combined value of the four stock exchanges.

Dont be left out

Gerald Muriuki, a research analyst at Genghis Capital said Kenya must not be left out of the union.

“Most foreign investors from the US and Europe say our market is small for their capital. Kenya also needs to consider joining in the spirit of the EAC so that we are not seen as isolated,” said Muriuki.

“We have carried out an assessment and in our opinion it is not a point of worry for us in the NSE because we have more economies of scale, more enterprises and we believe that it does not stand in the way of us forging a closer and a better alliance with the regional exchanges,” said new NSE chair Kiprono Kitonny.