STANLIB UGANDA LIMITED Uganda Monthly Markets & Economic Update April 2013 1
Inflation The annual Headline inflation continued to trend downwards to 3.4% from 4.0% registered in March 2013 while annual Core inflation experienced a decline of 100 basis points to 5.8% in March 2013. The drop in the headline index was largely driven by the decline in annual core inflation to 5.8% from 6.8% in March 2013. The annual food crops inflation rose to -7.5% from -8.5% while the Energy, fuel and utilities index also picked up to 1.8% from -2.0% in the year ended March 2013. However, the monthly headline index has continued to trend upwards with headline inflation rising by 1.4% compared to a 0.9% increase registered in March 2013. The monthly food crops index registered an 8.8% increase in April 2013 up from 3.9% in March 2013. The monthly EFU Index increased 0.1% in April from a 0.9% increase in March 2013. The increase in the monthly food index was driven by increments in prices of matooke, sweet potatoes, Irish potatoes, cabbages, tomatoes and beans. Inflation Movements Source: Uganda Bureau of Statistics 2
Outlook Inflation outlook is stable in the medium term with potential upside risks emanating from both internal and external factors in the near term. Interest rates The interbank markets remain flush with liquidity resulting in significant demand at the auctions evidenced by bid to covers amounts coming in at twice auction sizes. The month of April had three Government auctions with two Treasury bill auctions and two bond auctions of 3- and 10- year. Rates across the Treasury bill auctions remained stable with the 91-day T-bill being undersubscribed while the 182- day and 364-day T-bills were oversubscribed. Treasury bond auctions during the month had yield reductions on both the 3 and 10 year of 2.5% and 0.44% respectively. In light of the reduction in inflation in April 2013 and the high liquidity on the market, the Central bank held the CBR constant at 12% for the fifth month in a row. Although the Uganda yield curve is upward sloping, there is very little compensation for investing in the longer dated maturities compared to the short term maturities. 3
UGX Yield Curve Source: Bank of Uganda Lending rates continue to remain sticky with the 91-day and 7-day interbank holding steady. Market Interest Rates and Inflation Trend Source: Bank of Uganda 4
Outlook Rates across the curve are expected to remain steady in the near future. Budget developments will influence direction of rates depending on donor developments and expected mode of financing. Exchange Rates The shilling remained relatively stable during the month with slight biases towards weakening against most hard currencies. On a monthly basis, the shilling depreciated by 1.89%, 5.75% and 4.01% against the dollar, euro and Kenya shilling respectively. The trend witnessed by the shilling was due to mild increments in dollar demand by importers though not in the significant volumes compared to the past. Additionally, strong coffee earnings and increased portfolio flows have continued to support the currency against significant weakening. Exchange rate movement Source: Reuters 5
Outlook The shilling will remain relatively strong with threats to the local currency coming from unplanned expenditures which end up jeopardizing the Country s reserve position and the currency. Equity Market The ALSI and LSE closed the month of April at 1,531 and 245 units respectively representing growth of -0.97% and 7.62% respectively on a month on month basis. Year-to-date, the USE ALSI has picked up 25% while the local index which has predominantly been inactive registered 27% growth. The reduced growth on the ALSI was mainly due to the slowdown on the NSE as the index softened during the month. This affected the USE ALSI through the cross listed counters. The local index on the other hand has continued to post strong growth in the year 2013 driven by SBU and UMEME which have seen significant demand over the month with supply being relatively subdued. Turnover during the month was at Ugx 4.4 BN representing growth of over 800% from turnover during the same period last year. This significant improvement in turnover can be attributed to the addition of UMEME on the local market which has been well received and has continued to dominate activity on the market. Securities Exchange Index Performance Source: Uganda Securities Exchange 6
Please see last page for full individual stock performance. Outlook Investor demand has been significant across the dividend paying counters. We expect a slowdown in the index beyond book closure dates for the actively traded counters. 7
Uganda Securities Exchange: 30.April.2013 Securities Sector 30/04/2013 M-M YTD Market Cap P/E Ratio % Change % Change UGX Bln 30/04/2013 BATU Consumer 2,266 0.00% -0.09% 111.22 5.04 BOBU Banking 120-20.00% -52.00% 300 10.85 CENT Investment 621 9.72% 60.88% 375.67 11.12 DFCU Banking 1,030 3.00% 3.00% 256.06 8.33 EABL Brewing 9,393-0.75% 12.98% 7,404.02 22.29 EBL Banking 991 6.78% 33.40% 3,669.45 11.38 JHL Insurance 8,115 12.52% 50.00% 365.18 7.03 KA Transport 343 3.00% -3.65% 158.33 1.43 KCB Banking 1,295 6.41% 39.25% 3,820.47 11.15 NIC Insurance 35 0.00% 0.00% 14.14 1.10 NMG Media 8,708-13.81% 25.44% 1,368.19 21.84 NVL Media 600 0.00% 0.00% 45.90 11.89 SBU Banking 25 20.00% 50.00% 1,535.66 11.75 UCL Building 35 0.00% 16.67% 31.5 52.08 UMEME Utilities 315 5.00% 14.55% 511.52 8.96 Source: Uganda Securities Exchange; Stanlib Research Sources Stanlib Uganda Research Team Stanlib Uganda 4 th Floor, Crested Towers, (Short Tower) 17 Hannington Road P. O. Box 7131 Kampala, Uganda Telephone +256 417 15 4589/322/823 Fax +256 414 23 1116/230 608 Email: customercare.uganda@stanlib.com Disclaimer This document was produced by Stanlib Uganda with the greatest of care and to the best of its knowledge and belief. However, Stanlib provides no guarantee with regard to its content and completeness and does not accept any liability for losses which might arise from making use of this information. The opinions expressed in this document are those of Stanlib at the time of writing and are subject to change at any time without notice. If nothing is indicated to the contrary, all figures are not audited. This document is provided for information purposes only and is for the exclusive use of the recipient. It does not constitute an offer or a recommendation to buy or sell financial instruments or banking services and does not release the recipient from exercising his/her own judgment. The recipient is in particular recommended to check that the information provided is in line with his/her own circumstances with regard to any legal, regulatory, tax or other Consequences, if necessary with the he professional advisor. This document may not be reproduced either in part or in full without the written permission of Stanlib. It is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under local law. Every investment involves risk, especially with regard to fluctuations in value and return. It should be noted that historical returns and financial market scenarios are no guarantee of future performance. Investments in foreign currencies involve the additional risk that the foreign currency might lose value against the investor's reference currency. 8