Rwanda’s equities market continued to register muted performance into the month of September as market activity slowed down with investors taking positions with quarter three earnings expected. BK Capital’s Senior Investment Analyst, Kevin Karobia spoke to CNBC Africa for more.
Rwanda’s equities market continued to register muted performance into the month of September as market activity slowed down with investors taking positions with quarter three earnings expected. While I spoke to Kevin Karobia to take a look at the expected market movements. So looking at last week from an equities perspective market performance was muted there wasn't any changes across all the stocks which has also carried into this week. Also what we noted last week is turnover from an equities perspective also went down to around 21 million Rwandan francs from more than 900 million the previous week. So we saw less investor interest on an equities perspective. However on a fixed income side that's where we saw more activity. If you look at subscription rates on the shorter dated papers was at 167 percent although slightly lower than 225 percent recorded the previous week. But what we've been seeing really from a market perspective is investors really looking at the short term and fixed income market more. We're seeing some apathy per se on the equities market. However going into the end of Q3 as we start to see Q3 results that we expect to see at least a pick up in investor interest on the equities counters. Interesting and looking at the various counters we did see one of the stocks this is Bralirwa dominating market activity. Are we seeing other counters coming in as well? And of course I do know that investors are already taking positions ahead of Q3 earnings. Yes that's true. The main two counters in terms of turnover are the Bralirwa counter as well as BK Group. Last week we noted that BK Group had stronger turnover accounted for more than 91 percent of market activity and this does not come as a surprise really given that looking at historical trends they are the most two traded counters and you're right investors are starting to take positions only that we expect that that will pick up as we close Q3. If you look at Bralirwa expectation of 100 percent of PAT payout as dividends is enticing to an investor. If you look at the current dividend at 14.7 percent and we expect that the dividend will even be better in the year 2024 even higher than 2023. So we expect to see even going forward there will be increased activity on the BK Group counter and Bralirwa as well. And moving away from the counters of course we've also seen some interesting market activity around the Rwandan franc. This is of course on the currency front. The franc has continued to shed off against other world major currencies. Is this likely to persist and perhaps what sort of interventions should we anticipate from the central bank here in Rwanda? That's true if you look at on a near to date perspective the franc has lost against the USD now we are at six percent slower than last year similar period last year if you look at against other regional currencies for example against the Kenya shilling the franc is down more than 20 percent. I mean that was expected given the strength of the Kenya shilling in 2024 that's so it appreciate even against the USD. In terms of outlook and any interventions that can be made looking at it from a balance of payments perspective then the future does not look too bright from an USD perspective given that imports will continue to grow and continue to comprise a large percentage of the total external trade. However where we could see slight improvements is one mainly on the mining sector that is expected to continue to contribute quite a lot on an FX perspective also tourism which is expected to continue to pick up and from a market liquidity point of view currently the FX market is experiencing some pressures if you look if you shop around the rates you find that some banks are still having quite some challenges on an FX perspective however we expect that at least as the year comes to a close some of those key sectors from an FX perspective continue to pick up then we'll see at least some liquidity. And still staying with the currency front of course we've also seen the same applying to other jurisdictions across East Africa. An exception of course is the Kenya shilling where we've seen it sort of firming up despite the recent downgrades that the country went through and this is of course one of the major economies that if it coughs Rwanda also catches the cold but really what sort of impact is this having across the regional markets in the wake of increased cross listings? So from a Kenya perspective definitely Kenyan shilling up around 18 percent against the USD which also so now the Kenya shilling also gain against all the other regional counterparts which has also led to a lot of capital inflows from a Kenya point of view. If you look at the Kenyan stocks their foreign participation is continuing to pick up which is a key positive for them and even as we await the Fed decision this week which will influence also a lot in terms of capital flows into the region. We expect that once the Fed starts to cut we'll start to see investors start to look at more at the emerging markets or the frontier markets. We expect that Kenya, Rwanda will benefit from this and get more capital flows that will be really important for their capital markets. We expect to see increased demand for stocks and we even have two Kenyan counters that are really preferred by foreign investors in the NSE that are cross-listed here and they are going to benefit as well. One of the questions will be and one of the things we'd want to see is actions on how to spur trading of the cross-listed counters because like at a Rwanda perspective the cross-listed counters barely trade on the RSE yet on the NSE side they are still trading strongly. There's a lot of foreign investor participation so it's a conversation that we should also be having here in the Rwanda capital markets on how to spur trades on the cross-listed counters.
Theme: Rwanda's Equities Market Faces Muted Performance Amidst Increased Investor Apathy and Currency Depreciation
Rwanda's equities market has seen a subdued performance in the month of September as market activity slowed down with investors taking positions in anticipation of quarter three earnings. CNBC Africa had a conversation with BK Capital's Senior Investment Analyst, Kevin Karobia, to delve into the expected market movements. Karobia highlighted that last week saw a muted performance in the equities market with no changes across all the stocks, a trend that has persisted into the current week. Additionally, turnover from an equities perspective significantly dropped to around 21 million Rwandan francs from over 900 million the previous week, indicating a decline in investor interest in equities. Conversely, the fixed income side witnessed increased activity, with subscription rates for shorter-dated papers standing at 167 percent. This shift in focus towards short-term and fixed income investments reflects a certain level of apathy towards the equities market. However, as the quarter three results begin to unfold, Karobia expects a resurgence in investor interest in equities. The dominance of Bralirwa stock in market activity was noted, with investors also positioning themselves ahead of the anticipated quarter three earnings. The BK Group counter also attracted significant turnover last week, accounting for more than 91 percent of market activity. Both counters are expected to see heightened activity as the quarter progresses, with Bralirwa's projected 100 percent payout of profits after tax as dividends serving as a strong incentive for investors. The current dividend yield of 14.7 percent is expected to improve in the future, making the stocks even more enticing for investors. Looking at the currency front, the Rwandan franc has been depreciating against major world currencies, with a six percent loss against the USD compared to the same period last year. This downward trend is also observed against other regional currencies, such as the Kenyan shilling, which has depreciated over 20 percent against the franc. From a balance of payments perspective, the outlook for the USD does not appear optimistic due to the continued growth in imports. However, sectors like mining and tourism are expected to bolster FX reserves and alleviate some liquidity challenges in the market. The regional currency dynamics have seen the Kenyan shilling firming up, attracting capital inflows and foreign investor participation in the Kenyan stocks. The upcoming Fed decision on interest rates is expected to impact capital flows, potentially benefiting emerging markets like Rwanda and Kenya. Foreign investors are eyeing the cross-listed counters in the region, with a call for actions to stimulate trading of these counters on the Rwanda Stock Exchange (RSE) to match the robust activity witnessed on the Nairobi Securities Exchange (NSE).
"The dominance of Bralirwa stock in market activity was noted, with investors also positioning themselves ahead of the anticipated quarter three earnings."
Rwanda, equities market, investor apathy, quarter three earnings, Bralirwa, BK Group, dividends, currency depreciation, FX market, regional markets, Kenyan shilling, capital flows, Fed decision, cross-listed counters, Rwanda Stock Exchange, Nairobi Securities Exchange