East African market watch

Global markets have been facing significant volatility in recent times, triggered by the announcement of tariffs by the US administration. However, these tariffs have been paused for a 90-day period, leaving the markets in a state of uncertainty. To shed light on how regional markets have been faring amidst this turbulence, CNBC Africa's Zabihina spoke to Daisy Anthea Nitwe, Country Lead for Derivatives & Structured Solutions at Standard Bank Group Uganda. Nitwe provided valuable insights into the impact of these developments on the East African market. When discussing the potential impact of the tariffs, Nitwe highlighted that the East African countries export around a billion dollars to the US, with Kenya leading at $600 million, followed by Tanzania at $200 million, and Uganda at $80 million. Despite the lower export figures, the impact varies with Kenya expecting a $100 million hit, Tanzania between $30 to $50 million, and Uganda facing even lower impact chiefly due to lower export volumes as well as Uganda's past exclusion from AGOA. In response to the volatility, Nitwe noted that the markets experienced the most significant price action of the year. The currencies of Kenya and Uganda witnessed depreciation, with the Kenyan shilling reaching a high of 129.8 and the Uganda shilling hitting 37.30, prompting interventions from the central banks. Furthermore, Kenya saw an increase in risk premiums on Eurobonds, reminiscent of pre-Covid levels. The fluctuation in the market has opened up opportunities, especially in Eurobonds, with significant rises observed in the short end of the curve. Additionally, Nitwe mentioned potential opportunities for exporters in terms of selling or underwriting hedges. In terms of monetary policy, Kenya recently announced a rate cut amidst the global uncertainty caused by the tariffs. The motivation behind the cut was attributed to the belief that weak credit growth poses a greater threat to the economy than external risks. With the future outlook still highly speculative, Nitwe emphasized that volatility and uncertainty remain constants in the current environment. She predicted that capital flight and a cautious approach from central banks are likely scenarios as the market awaits further developments. Nitwe concluded by underscoring the prevalent volatility across all asset classes, highlighting the need for vigilance and adaptation in navigating the challenging market landscape.