The mismatch in demand and supply that is negatively reducing volumes traded and returns on investments at the Rwanda Stock Exchange should be a concern for
Industrial players should employ every strategy within their means to address the challenges the market is facing. This intervention should help the market to play its central role of mobilising longterm capital and facilitating securities trading.
All indications are that many who would use this market to mobilise patient capital from local and global investors are still sceptical as it has taken almost five years before a local company listed.
The slow pace at which private firms are listing should be a call to solutions that will trigger clients’ interest in the market and build confidence.
More players means more products, resulting in many investors seeking to raise capital and savers wanting a share of the businesses they admire.
It should be noted that a vibrant capital markets accelerates and sustains economic development for economies. This informed the government to float its shares in Bralirwa and Bank of Kigali — blue chip companies, to kick-start the equity side of the market but also interest the private sector to raise long-term capital through the capital markets.
Informed decisions should start when allotting IPO shares on the primary markets as they have a direct influence on turnovers on the secondary market. Most times, while the people allocating shares ensure a better price for the issuer by allotting monied, big investors, including fund managers, more or less their full allocation that
they budget to invest, industrial players believe this leaves little room for secondary activity.
For instance, in the BK and Crystal IPOs, foreign investors were allotted significant shares of what was on offer and there was little incentive for them to come back to buy in the secondary market at higher prices. In Bralirwa’s instance, share price was fixed and sold at one price to all investors.
The cry on the market is that the foreign pool left a significant unsatisfied demand that found its way into the secondary market and fuelled the share price to increase almost eightfold.
But like most sub-Saharan stocks, RSE stocks are reeling from depressed prices, which have slid to their lowest, eating into investors’ profits and resulting in reduced trading volumes as some investors hold onto their shares. As a result, the Share Index (RSI) fell by a record 24 per cent from 235.6 points in January to 174.2 points in
The depression can be reduced when stronger, profitable local companies are encouraged to list. This calls for a rigorous recruitment drive.
SOURCE: THE EAST AFRICAN