Uganda market review

The East African markets are facing various challenges amidst the US Federal Reserve's target of 2 per cent inflation. Despite this, the Uganda Securities Exchange has seen a significant surge of 19.45 per cent since the beginning of 2024. Daisy Anthea Nitwe, the Country Lead for Derivatives and Structured Solutions at Standard Bank Group in Kampala, Uganda, provided valuable insights into the market dynamics in a recent interview with CNBC Africa. Nitwe highlighted the mixed signals in global policy direction, especially among G7 countries, as forecasted by the IMF. While the market has priced in potential rate cuts starting in September, she mentioned that such cuts could have a positive impact on East African economies. The reduction in borrowing costs could lead to increased development expenditure, fostering growth and easing debt sustainability concerns. Additionally, portfolio inflows could boost the region's currencies and attract investment, ultimately benefiting private sector credit growth and GDP. The surge in the Ugandan stock exchange, up by 19.45 per cent, has been attributed to major counters like Umeme, Standbig, Bank of Baroda, and MTN, trading cum dividend. This dividend promise attracted investors, contributing to the exchange's growth. The appreciation of the Kenyan shilling also impacted NSE cross-listed stocks on the Uganda stock exchange. Addressing the recent Kenyan protests, Nitwe indicated that while the demonstrations have yet to directly impact financial markets, any escalation could lead to regional asset pressure. She noted a slight depreciation in the currency following events like Moody's downgrade and changes in Kenya's political landscape. The protests have caused some volatility in the market, particularly affecting the yield curve and prompting offshore investors to adopt a cautious approach. Nitwe also examined the factors influencing the Ugandan shilling's appreciation, citing commodity price increases, yield hunters' interest in the region, and soft corporate demand. With commodity export earnings rising due to favorable harvests and global demand, the Ugandan currency has remained stable. Looking ahead, Nitwe emphasized the importance of monitoring weather patterns, policy directions of G7 countries, geopolitical tensions, and regional political climates. Weather extremities could impact agricultural-dependent economies, while shifts in global rates and commodity prices could affect currency values. Additionally, political stability in the region, especially in Kenya, remains a key focus for market observers. In conclusion, Nitwe provided valuable insights into the East African market landscape, highlighting the potential opportunities and challenges that lie ahead.