Rwanda’s capital markets have kicked off the week with a strong start as equities rallied as the year end draws near. CNBC Africa is joined by Gideon Sang, Senior Investment Research Analyst at BK Capital for a temperature check on the markets and key counters to watch this week.
Rwanda’s capital markets have kicked off the week with a strong start as equities rallied as the year end draws near. CNBC Africa is joined by Gideon Sang, Senior Investment Research Analyst at BK Capital for a temperature check on the markets and key counters to watch this week. Thank you so much, Gideon, for joining us on the programme. It's a brand new week. What are you making of this week from a trading perspective? How are the markets reacting? Yeah, thanks a lot. And it's a great time once again to join the conversation. Yeah, so maybe you can catch up on what happened last week before we move on to what we expect to see this week. So last week, starting with the fixed income, what we saw last week was that investors still have a lot of interest in the government papers, especially the T-bills, given that last week there were no bonds like the previous week. And what we saw last week in terms of treasury bills, there are a lot of interest, especially on the 920 T-bill. And also we saw interest generally in all the spectrum, starting from 28-day, 29-day, 182 and 364-day papers, with generally overall over-subscription, which was high as compared to last week. And what we see in terms of yields, we've seen the yields slightly coming down in majority of the papers. In the four papers that were issued, only three of them recorded slight decline in terms of yield, which also reflect what we've seen in other markets, with yields now moderating to the historical levels. Quite a busy week it seems like. And just looking at the bigger picture, when you're looking at the Rwanda Stock Exchange, how did the counters perform? Last week when we spoke, we did see the main counters, that is MTN, dominating as well as Bralirwa. How does it look like this week? Yeah, so generally what we've seen in the local equities market, we saw an upward trajectory in terms of performance of both the Rwanda share index and all share index. And that was mainly because of performance of Bralirwa, which you've seen the price in the last couple of weeks increasing from 200 to close last week at 220 Rwandan francs. And this is mainly because of the increased demand on the counter. So we've seen increased demand on Bralirwa counter, which has pushed the price higher. Given now that the holders of the shares are waiting and see maybe there is still renewed interest and therefore the price is being pushed up because of the demand. And also looking on our investment side now is given that the counter is about to close the year and this is a dividend paying counter with a dividend yield of above 13%. So we expect also now investors who want to get into the counter targeting the dividends, which we expect the company to pay at the end of the year. So looking forward to the week, we expect to see still interest on the same counter because even in terms of market turnover last week, out of the total 81 million turnover that was recorded last week, about 95% was from the same counter. Interesting. And do you expect some of the other listed players to issue their Q3 results this week? What is on your radar? Yeah, sure. For this week, we are not expecting to see a lot, especially on the other companies. But what we want to see is the financial companies. We saw last week INM releasing their results, which posted good results in terms of profitability. So also now the financial sector companies, the banks specifically, we expect them now to release their results and if possible, in terms of interim dividends, we'll be able to see. But for the other ones, in our radar, there is no company that we are expecting them to release the Q3 results. All right. And last week, we saw the central bank issuing the MPC and they retained the benchmark lending rate at 6.5%. So far, how is the market responding to this? Is it likely to see more credit outflow? What is your take? Yeah, so in terms of the impact of the maintained CBR rate, it usually takes some time for the rate to reflect in the market. But what we've seen in terms of the yield, like I mentioned initially, we saw just a slight decline in terms of yields, because you always expect that when the central bank cuts the base rate, that also now the investors and the central bank, when it's borrowing from the public, they accept yields, they accept the rates, and they are bringing down the rates. But that is yet to be reflected. What you're expecting now in the short term to medium term is for the rates to continually come down to the historical levels. But the basis of maintaining the rate by the central bank last week was mainly because of the inflation that is still very uncertain. Last month, that is the previous month before September, the inflation had come down to 2.5%. But what we saw was a slight uptick to 3.8%. So I think from where we sit, we saw the central bank a bit cautious in terms of not reducing the rate from the current 6.5% because of uncertainty in terms of the inflation outlook. Clearly, inflation has been sticky throughout the year, Sang, and we're still seeing concerns, especially now that we are seeing the weather patterns not looking quite that good for the food inflation going into next year. What are some of your concerns? Will we expect a rate hike come the next round of MPC, or is it still too early to make that call? Yeah, I think you're right to mention so. It's still very early to mention so. That is likely to be the rate to be increased again. I think what we would expect is may either maintain or cut. Also to follow what is happening generally in the global space, we've seen majority of the central banks around the world either maintaining or cutting down. And we've seen inflation generally, as you've mentioned this year, it has come to an average of less than 5%, which is still good as compared to last year. So what you would expect to see towards the end of the year and early next year Q1 is either the rate to be maintained or cut depending on the movement of the inflation and generally what is happening globally. All right. And we were seeing some interesting developments, especially on the currency market. Right now, the RON and FRANC hasn't really held quite strong compared to the USD. And the currency year to date has sort of shed off about 8.6% in terms of value. And from your look of things, how has the currency performed and going into December, especially a period where it's characterized by a lot of diasporas coming back home, how is this likely to play out as well as for the service sector for tourism? Yeah. So in terms of currency performance, what you've seen is a bit of, even last week, let me just mention for last week, we saw the currency not depreciating as quickly, as fast as the other weeks. We saw even performing better, appreciating in comparison to the regional currencies like Indian Shilling and Ugandan Shilling. So what you saw last week was a bit better performance. But in terms of USD now with RON and FRANC, it's still a depreciation, as you mentioned, above 8.5% currently. And this is mainly because of the pressure that the currency is really in with a lot of demand of the dollar. But as you mentioned as well, looking into December, we expect people to come in from the service sector. And also there is a deal between the government and the IMF, which we expect to support the currency. So the pressure is likely to come down from those inflows of the dollar. So the demand may be high, but also when there is a bit of supply of the dollar, we expect the pressure to be a bit better. So in terms of our outlook on how the currency will perform at the end of the year, we don't expect to see the depreciation what you saw last year, maybe a range of not more than 9.5% depreciation of the year from the current 8.5%. But still pressure is there. But we expect those sufficient forex reserves to continue supporting. And there are still some imports, some exports, as you mentioned, some exports that are coming into the market. So with the increased dollar inflows into the economy, then the pressure will be a bit less as compared to other periods. Well put, Gideon. And of course, many are waiting to hear and see how the IMF funding will play out for Rwanda. How much are we looking at, and how soon is this likely to be closed following the recent visit that was done by the IMF delegation that came to Kigali? Yeah, so in terms of how we expect to see from the communication that you do have, it is supposed to be closed towards the end of the year. So maybe inflows now to come in in the first quarter of 2025. Yeah, so in terms of the amounts, it was in the region of about $80 million to $120 million, depending on the exchange rate at that time, and depending on also some of the considerations and terms and conditions to meet. So what you expect to see, if that inflow is going to come, then it will increase the forex reserves that the government usually hold to support the currency and also to import essential materials in the economy.
Theme: Rwanda Capital Markets Update: Strong Start as Equities Rally
Rwanda's capital markets have kicked off the week with a strong start as equities rallied with the year end drawing near. Gideon Sang, Senior Investment Research Analyst at BK Capital, provided insights on the market performance and key counters to watch for the week. Last week, investors showed significant interest in government papers, particularly T-bills, with high oversubscription across various tenures. Yields saw a slight decline, aligning with global trends of moderating rates to historical levels. Bralirwa emerged as a top performer on the Rwanda Stock Exchange, reflecting increased demand and a price surge to 220 Rwandan francs. The company's impending year-end dividend payout, boasting a yield of over 13%, positioned it as an attractive investment option. With market turnover predominantly driven by Bralirwa, continued interest is anticipated in the counter this week. The financial sector is expected to release Q3 results, with a focus on banking institutions following positive performances from companies like INM. The Central Bank's decision to maintain the benchmark lending rate at 6.5% was influenced by lingering inflation concerns, indicating caution amidst uncertainties. While inflation trends have been relatively stable, future decisions will depend on global market movements and domestic factors. The Rwandan Franc's depreciation against the USD, shedding about 8.5% year-to-date, has put pressure on the currency. However, expectations of diaspora inflows in December and support from the IMF deal are anticipated to mitigate the depreciation. The IMF funding, estimated between $80 million to $120 million, is projected to bolster forex reserves and stabilize the currency, with inflows expected by the first quarter of 2025. Overall, Rwanda's capital markets exhibit resilience amidst evolving global and domestic dynamics, positioning for continued growth and stability.
"Rwanda's capital markets have kicked off the week with a strong start as equities rallied with the year end drawing near."
Rwanda, Capital Markets, Equities, Trading, Market Performance, T-bills, Bralirwa, Dividends, Financial Sector, Central Bank, Benchmark Rate, Inflation, Rwandan Franc, USD, IMF Funding, Forex Reserves