Lack of investor confidence, declining company results drags USE to hit an all-time low

Uganda Stock Exchange (USE) has faced a challenging period with a significant 60% drop in February, making it hit an all-time low. The decline in company results and lack of investor confidence have been major contributing factors to this plummet. Analysts have pointed out that the entire East African region, including markets like Nairobi and Tanzania, has been facing similar struggles. However, USE seems to be bearing the brunt of these challenges more severely. Charles Bwogi, an analyst, emphasizes that the lack of investor activity due to the threat of the coronavirus has added to the already fragile market conditions. With major institutional and offshore investors holding back, the market has become increasingly vulnerable. The future of USE remains uncertain, with Bwogi suggesting that the African governments need to focus on fostering local investor participation to reduce dependence on external funds. Encouraging Ugandans to explore equity markets as a viable investment option with potential incentives could help stabilize the market in the long run. In light of these circumstances, MTN, the largest telecommunications company in Uganda, has taken significant steps to boost market confidence. The company has disclosed its intention to obtain a 14-year operation license, which is contingent on listing 20% of its shares on the Uganda Stock Exchange. This move by MTN is crucial for the local market as it bolsters the company's commitment to Uganda's economy. In 2019, MTN reported impressive earnings, underscoring its influence in the telecommunications sector. By going public on the exchange, MTN aims to mobilize resources from the domestic market where it operates, thereby benefiting local investors and contributing to the growth of Uganda's equity markets. The prospect of owning shares in a prominent entity like MTN has sparked interest among institutional investors, hinting at a potential surge in market activity once the shares are listed. Bwogi suggests that MTN's listing could lead to a symbiotic relationship between the company and its subscribers, as they become part-owners of the operations they rely on. Additionally, by aligning with the 'buy Uganda, build Uganda' policy, MTN's listing could pave the way for favorable government regulations and enhance its standing in the market. The move is seen as a strategic step towards cementing MTN's position in the telecommunications industry and fostering economic growth in Uganda.