Rwandan market review

Rwanda’s equities market recently experienced a period of muted activity, with both the Rwanda Share Index (RSI) and the Rwanda All Share Index (ALSI) remaining unchanged. Despite this, there are still pockets of interest that investors can capitalize on in the equities market, according to Kevin Karobia, Senior Research Investment Analyst at BK Capital. Karobia highlighted the attractiveness of counters like Braliroa, which boasts a dividend yield of 15.5%, significantly higher than government paper and fixed income instruments in the Rwandan market. He suggested that investors with a medium to long-term perspective should pay attention to such opportunities for potential capital appreciation. On the other hand, there has been a slight slowdown in activity on the BK group counter, with a reduced dividend yield of 10.9%. However, Karobia noted that there is still room for long-term capital appreciation, with a potential upside of more than 40% in the share price of 300 Rwandan francs per share. This indicates the importance of looking beyond short-term performance metrics and focusing on long-term growth prospects in the equities market. Furthermore, Karobia discussed the oversubscription of T-bills by about 150%, suggesting continued investor interest in short-term papers to lock in current rates before any potential rate moderation. The market dynamics indicate a strategic shift towards shorter duration instruments, potentially influenced by recent 50 basis points cut by the National Bank of Rwanda (BNR). Additionally, the BNR's efforts to mop up market liquidity with a 28-day central bank paper further underscore the robust demand for short-term instruments. In terms of currency trends, the Rwandan franc has shown improved performance against the US dollar, with a year-to-date depreciation of around 3%, compared to 5.7% during the same period last year. Karobia attributed this slower depreciation to improved domestic agricultural production in 2024 and lower food imports, which mitigate the impact of imported inflation and currency depreciation. Moreover, the minerals sector has seen positive growth, with mining revenues reaching one billion last year, contributing to a stronger US dollar. As a result, Karobia forecasts a depreciation range of 7% to 8% by the end of the year, aligning with the historical average of 7% over the last five years and notably lower than the 18% depreciation recorded last year.