Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Financial investments are subject to market risks, and readers should do their own research and consult with a professional advisor before making any investment decisions. Furthermore, the views, information, or opinions expressed herein are solely those of the author in their personal capacity; they do not necessarily reflect the views of the author’s employer or BusyContinent.
The UGX remained stable against the USD entering the weekend due to limited activity on the market by importers and commercial banks. The outlook reflects a weaker shilling. This has already posed a threat to inflation wherever the foreign currency is involved (Input/Output).
Recent data from Uganda Bureau of Statistics (UBOS) indicates that during August, inflation slightly declined to 3.5% from 3.9% in July. However, price increase among some key commodities continues to present inflationary pressures last seen more than a year ago.
Soaring petrol prices fuel inflationary pressures
Fuel prices, especially petrol, have increased by an average of 6.2% or over Shs300 to Shs5,210, which presents renewed inflationary pressures. Diesel has remained stable at an average of Shs4,880, but experts indicate it could also move northwards in the coming days.
Prices of selected food items have been increasing, with cooking bananas (matooke) and round onions registering some of the largest increases. During August, UBOS data indicated, monthly food crops and related items inflation increased by 3.6%. On a micro scale, I believe one should be willing to undercut expenditure on imported products. Ranging from groceries to apparel. Let’s see more potential effects of the World Bank’s embargo on the economy.
- Reduced development projects
- Economic instability
- Reduced investor confidence
- Debt management crisis.
What’s new in the securities market?
All to know about Airtel Uganda’s Initial Public Offer;
- Offer opened on 30th August 2023.
- Offer closes on 13th October 2023 at 4 pm
- Announcement of share allocation 30 October 2023 at 4:00 p.m
- Listing of Airtel Uganda Shares on the Uganda Securities Exchange (“USE”) and the start of trading will commence on 31 October 2023 at 9:30 a.m.
- The Price for 1 share is UGX 100. Minimum number of shares per application is 2,500 and in multiples of 500. The minimum application amount is UGX 250,000.
- 5 Incentive Shares for every 100 Shares allocated to retail investors applying for up to 18.5mn shares
My Take
Buy this stock. WHY?
- Wherever Airtel is listed on the continent, it has good returns and that share price has grown almost twofold in some economies.
- Telecom and banks are increasingly becoming the stocks of preference this year. Something we will make sense in the next edition.
- Airtel seems to have a very attractive Dividend policy with an average payout ratio of 87% in the last 5 years. Compared to MTN Uganda at the time of listing which had a 56% payout ratio. If Airtel Initial Public Offer maintains this going forward, that would be amazing.
Money Markets
The overnight money was trading at an average of 10.5% compared to the one-week money that was trading at an average of 11%. Below is how interest rates look, indicatively. The upward trend is on. There is a five-year and fifteen-year bond auction this week.
2 YEAR BOND 13.50%
3 YEAR BOND 13.50%
5 YEAR BOND 13.50%
10 YEAR BOND 15.49%
15 YEAR BOND 17.00%
20 YEAR BOND 15.30%
My Take
Go for it. Interest rates are likely to improve due to looming inflation and bad exchange rate regime. I predict 15% and 17% p.a. rates respectively. There is a 91-day, 182-day, 364-day Treasury bill auction next week. Below is what the interest rates are likely to look like.
Indicative interest rate per annum
91 DAY T-BILL 10.00%
182 DAY T-BILL 12.00%
1YEAR T-BILL 13.50%
All in all, the world is full of so many uncertainties but as an investor, you can always be sure that the higher the risk, the bigger the return. So, remember not to place all your eggs in one basket. Diversify your portfolio. Fixed Income, Stock, Forex, real estate, health…. Name it!
Seth Nuwagaba is an investment banker at one of the biggest banks in East Africa.
