East Africa market review

East Africa's money markets have been showing resilience in the face of various economic challenges. CNBC Africa recently had the opportunity to delve into the market performance and underlying issues with Chad Nyakatura, the Money Market Sales Manager at Stanbic Bank Uganda. Nyakatura provided a detailed analysis of the market trends in both Uganda and Kenya, shedding light on key sectors and economic factors affecting the region. The East African countries are facing a mix of positive and negative influences that are impacting their currencies, trade, and overall market stability. Here is a comprehensive review of the discussion with Nyakatura. Kenya's money markets have been off to a good start this year, with the local currency holding steady. According to Nyakatura, the market performance in both Uganda and Kenya has been influenced by the ongoing earnings season, driving stock prices up on the expectation of dividend yields. Notably, the banking and telecommunications sectors have been high performers, with a 5 percent uptick in the banking sector in Kenya. The equity performance has also shown a bullish trend, attributed to an improvement in Kenya's macroeconomics and increased demand from foreign investors. In Uganda, Nyakatura highlighted Umeme, an electricity distribution company, as a significant player set to roll out soon, with the government seeking funding for the venture. When discussing the underlying economic issues affecting currencies in the region, Nyakatura emphasized the stability of the USDKE in Kenya, driven by the steady supply of dollars from key sectors such as tea, horticulture, and remittances. On the other hand, the USDUGX in Uganda is expected to experience a slight depreciation due to seasonal demands from corporates paying dividends. However, anticipated inflows from coffee and investors are likely to balance the currency pair, providing a stable outlook for both Kenya and Uganda. The conversation also touched on the impact of regional conflicts, particularly in eastern Democratic Republic of Congo and South Sudan, on the financial markets. Nyakatura noted that despite the ongoing crises, the markets have not seen a significant disruption yet. However, there has been an increase in government spending in Uganda to address the influx of refugees and defend borders, potentially leading to higher interest rates. Additionally, cross-border trade disruptions have affected the supply of dollars into the country, posing challenges for market stability. Addressing the global issue of tariffs, Nyakatura highlighted the potential implications for African markets. With a focus on Africa's business relations, he mentioned key concerns around potential trade disruptions, especially in light of policies like the land law in South Africa. While direct tariffs have not been imposed, there is a sense of uncertainty that remains a pressing issue. Nyakatura pointed out the significance of AGOA (African Growth and Opportunity Act) in providing access to the U.S. markets with free tariff benefits for African manufacturers. However, countries heavily reliant on donor aid from the U.S. have experienced a negative impact on inflows, leading to rising unemployment levels in recent weeks. In conclusion, Nyakatura's insights offer a nuanced perspective on the East Africa money markets, showcasing a delicate balance between market performance, economic challenges, and external influences. Despite facing various headwinds, the region remains resilient and adaptable, navigating through uncertainties and leveraging opportunities for growth.