Electronic link opens cross border trade of shares

Nairobi – The electronic link between Kenya and Ugandan stock markets has gone live, opening new possibilities for investors seeking cross-border trade opportunities.
Umeme board chairman Patrick Bitature (left) and Chapman during the listing of the company’s share at the NSE last year. Net photo
Umeme board chairman Patrick Bitature (left) and Chapman during the listing of the company’s share at the NSE last year. Net photo

Nairobi – The electronic link between Kenya and Ugandan stock markets has gone live, opening new possibilities for investors seeking cross-border trade opportunities.

Ugandan power distributor, Umeme, recorded its first trade at the Nairobi Securities Exchange (NSE) on August 1 since its cross-listing on December 14.

The Regional Inter-depository Transfer Mechanism (RITM), which links Kenya’s Central Depository and Settlement Corporation and Uganda’s Securities Central Depository, made the first trade of Umeme possible after the going for eight months without a single trade.

The Wednesday trade saw 1,000 of the utility’s shares moved on the NSE at a debut price of Sh13 each.

Despite being cross-listed on the NSE, trading of Umeme shares was only possible on the Uganda Securities Exchange (USE), which admitted the shares on November 30 through an initial public offering (IPO).

The immediate benefit expected from inter-linkage of the trading systems is more convenience for investors who bought the shares locally.

“This will benefit investors and issuers of cross listed securities such as Umeme. It gives great leverage to shareholders as they are able to decide on which exchange to trade and in which currency,” said NSE chief executive Peter Mwangi in a statement.

Umeme shares are frequently traded on the USE, and Kenya investors who purchased the stock locally should benefit from its high liquidity.

“Since the listing of Umeme shares, we have witnessed increased daily activity at the USE and Umeme is one of the most active counters,” said USE chief executive Joseph Kitamirike.

Umeme accounted for 45 per cent or 125,059 of the 277,792 shares traded on the USE in Wednesday’s trading.

Since its listing, 163,504,455 shares have traded. The closing price values Umeme at sh21b, making it the third-highest capitalised company on the NSE’s energy and petroleum segment after KenGen (sh35b) and Kenya Power (sh27.4b).

“With the integration, our shareholders have a choice of where they want to trade, which will significantly increase convenience for our investors,” said Umeme managing director Charles Chapman.

The RITM will also make it possible for investors who want to unlock the value of their investment at current prices. The sh13 trading price on Wednesday reflected a 30 per cent appreciation of Umeme shares from the sh10 IPO offer price.

The East African Securities Exchange Association (EASEA), the umbrella body for the region’s stock exchanges, had set Monday July 29 as the deadline for the RITM to be up and running, but has pushed the date forward.

On the reverse, linkage of the two clearing houses will allow investors in Uganda to easily trade in Nation Media Group, Kenya Airways, Jubilee Holdings, East African Breweries Limited, Centum Investments and Equity Bank; Kenyan stocks that are cross-listed on the USE.

The EASEA is made of the NSE, USE, the Dar-es-Salaam Stock Exchange and the Rwanda Stock Exchange. It has made a raft of proposals targeted at easing cross-border trade of shares and other securities.

EASEA initiatives include floating IPOs in local currencies and giving investors across the East Africa Community uniform treatment when it comes to participating in public offers.

If enacted into law, the proposals will see investors participating in IPOs floated by firms from Kenya, Tanzania, Uganda, Rwanda and Burundi treated equally.

EASEA has proposed to make IPOs on any of the four exchanges identical. Burundi is yet to have a stock exchange.

“In this regard, EASEA discussed the draft regional listing directives which will be shared with the East Africa Community (EAC) for adoption in a bid to standardise regional listings,” said EASEA in a statement on outcomes of its 22nd meeting held in Zanzibar last week.

The Rwanda Stock Exchange is also planning to link the Rwandan stock market with other regional market in the near future through the Regional Inter-depository Transfer Mechanism, according to bourse officials.

“Our system is not yet synchronised with other stock markets, but we are working on that,” Celestin Rwabukumba, the RSE co-ordinator, told Business Times this week.

Kenya Commercial Bank and Nation Media Group are the only cross-listed firms on the RSE with Uchumi Supermarket having contacted the bourse last month.

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