Page 15 - March Edition 2018

Trading at Uganda 13  13

securities exchange Moody’s Assign
Tanzania B1 High
eases offotal market turnover at the Uganda Credit Risk Rating

Securities Exchange (USE) during February Moody’s Investors Service
declined 24.8% to UGX 6.24 billion (about (Moody’s) assigned a first-time
$1.7 million) from UGX 8.37 billion ($2.3 local- and foreign-currency
million) in January. Volumes traded during issuer rating of B1 to the
the month were 87.9% shy of the 175.05 Government of Tanzania.
The B1 rating indicates high
Tmillion shares traded in January falling to credit risk. The rating outlook
21.27 million. is also negative. Among
February closed with the USE All Share Index shedding 0.85% the issues that explain the
of its value while the Local Share Index and the C8, posted a rating, the company included
marginal 0.56% gain after four of the local counters appreciated Moderate economic strength
in price. balancing the country’s very
However, yields from government securities gained momentum high economic growth, Very
amid stable investor demand. In February, the short-term low institutional strength
government securities gained by an average of 11.73 basis constrained by governance
points (bps) across all tenors most of which were on short term challenges that have hampered
notes. effective fiscal policy-making,
The 182D took the lead rising 33.50 bps to 8.4%, the 364D Low fiscal strength driven by a
rose 30.90 bps to 9.3% while the 91D advanced by 19.10 bps to moderate level of government
8.4%. Medium term notes were relatively mixed after only the debt.
2Y bond gained 4 bps to 10.96%, the 3Y remained unchanged The rationale for the negative
at 11.2% while the 5Y shed 17.5 bps to 12.3%. On the longer outlook is based on an
horizon, the 15Y had the biggest gain of 20.80 bps to 14.4% increasingly unpredictable
while the 10Y increased 3 bps 13.98%. Over a one-year period, policy environment weighing
yield declines on all tenors have narrowed to 24.2% relative to on the business climate,
27.8% in January particularly in the mining
Bank of Uganda reduced the Central bank rate (CBR) by sector, that could have a long-
50 basis points to 9% expressing a cautionary stance on the term negative impact on the
trajectory of economy. BoU expects the economy to pick up to a country’s growth potential
projected range of 5 to 5.5% in the current financial year and and ability to attract foreign
average 6.3% over the next 5 years. The bank indicated that investment. In addition,
business activity in the country improved with Foreign Direct Moody’s indicates that an
Investments (FDI) growing 18.5% and credit extension by upgraded rating from negative
10.8% in December 2017. to stable is unlikely in the
Annual Core Inflation shed 0.9 percentage points to 1.7% foreseeable future unless the
leading to the reduction of Annual headline inflation to a government of Tanzania was
low of 2.1% from 3% in January. The consumer price index to exhibit a more predictable
report (CPI) by the Uganda Bureau of Statistics indicates policy framework that
the continued decline in prices of goods classified as other continues to support very high
goods which include Sugar, bread and cereals as the major economic growth over the
contributor to the low core inflation. Annual food Crops medium term.
inflation dropped to below zero at 0.7% from 1.4% in January, Conversely, a deterioration in
Annual Energy, Fuels and Utilities (EFU) however increased the business and regulatory
to 11.2% following a 7.3% rise in liquid energy fuels, 20.4% environment would put
increase in solid fuels. downward pressure on the
The Uganda shilling shed 0.58% of its value with mounting credit profile, the rating
pressure in the last week of February. The local currency company concludes. Moody’s,
had been stable throughout the month averaging UGX 3,628 along with Standard & Poor’s
but broke out to a low of UGX 3,653. On a year to date basis, and Fitch Group, is considered
the shilling lost 0.16% of its value against the dollar, 1.85% one of the Big Three credit
against the Kenya shilling while it remained stable against the rating agencies.
Tanzania Shilling.
Exclusive Briefs