Market dynamics & policy shifts in Uganda & Kenya

The financial landscapes in Uganda and Kenya are experiencing significant shifts driven by market dynamics and key policy moves. In Uganda, the recent exit of Umeme from the market has raised concerns about liquidity and investor sentiment. Phillip Ssali, Head of Sales Global Markets at Stanbic Bank Uganda, shared insights on the potential impacts of Umeme's exit on the broader Ugandan market. Ssali mentioned that the government has already secured the funding required for the Umeme buyout, and as a result, he does not expect a significant shift in any particular sector or market. He highlighted that investors may start exploring other blue-chip stocks in the Ugandan market such as Stanbic, Baroda, MT, and Airtel. From a sector allocation perspective, investors might also look at the Nairobi Securities Exchange (NSE) for similar stocks to Umeme in terms of flow. The government's motivation for the buyout is to lower energy costs and support industrial growth in Uganda. While the long-term impacts are yet to be seen, Ssali remains optimistic about the potential benefits for the country. Moving to Kenya, the decision to skip the $800 million IMF review has raised questions about the country's fiscal and monetary policy options. Ssali pointed out that the Kenyan government is eyeing a new IMF program which could change the current narrative. With gross reserves standing at $10.5 billion, equivalent to 5.1 months of import cover, and bilateral funding transactions in the pipeline, Ssali believes that there are no immediate concerns about macroeconomic stability. He expressed confidence in the Kenyan authorities' ability to attract funding and manage the economy despite short-term challenges. Additionally, the banking sector in East Africa is gearing up for the earnings season. Ssali expects to see positive results from banks due to the region's GDP growth exceeding 5% over the past year. Despite some challenges in private sector credit growth, the overall outlook for the banking sector remains favorable. With a positive Purchasing Managers' Index (PMI) in Kenya and Uganda, Ssali anticipates decent to very positive returns from the banking sector as earnings reports are released.