Rwandan market update

Rwanda's equities and fixed income markets have kicked off the new year on a robust note, with T-bills remaining oversubscribed and showing an overall subscription rate of 130.1 per cent, a significant rise from the 105.6 per cent recorded at the previous auction. Kevin Karobia, Senior Investment Analyst at BK Capital, provided insights into the expected market movements during a recent interview with CNBC Africa. As investors navigate the landscape, the equities market in Rwanda is somewhat muted, with a lower turnover compared to other periods, expectedly so as the year commences. Despite the subdued performance, there is a notable demand from investors positioning themselves in key equities counters, such as Bradley Rua and Bank of Kigali. Investors are particularly drawn to Bank of Kigali following the interim dividend payout at the end of last year. Many shareholders are reinvesting their dividends into shares in anticipation of further payouts. Bradley Rua, having observed a substantial share price rally in 2024, is also attracting investor interest. With an optimistic outlook on increased disposable income among the Rwandan population, investors are eyeing potential growth in the company's top-line revenues, leading to enhanced bottom-line performance and dividend payouts. On the fixed income front, investor interest remains strong on the shorter end of the curve despite decreasing interest rates. Treasury bills continue to be oversubscribed, reflecting sustained market activity. The government's upcoming issuance of a seven-year paper is anticipated to garner significant interest from institutional investors seeking to capitalize on prevailing rates before anticipated cuts later in the year. The market outlook for Rwanda signals increased activity and a proactive investment climate. Moving forward, the performance of the Rwandan currency is under scrutiny, especially after a lackluster showing in the previous year. Concerns regarding inflation have been raised following indications of a potential rise highlighted by the country's governor in a recent MPC meeting. Despite positive GDP growth figures, reaching 8% in Q3 and consistent growth in previous quarters, inflation may face pressures due to lower harvests in the second season. Inflation is expected to hover around 5% for most of the year, while the Rwandan franc is likely to experience continued downward pressure. The current account deficit remains a persistent challenge for the currency, with interventions from the IMF and BNR attempting to stabilize the situation. The influx of FX liquidity into the market is expected to play a crucial role in managing the currency's performance amidst fundamental trade imbalances.