[2008-09-04]  New UCL stocks rise
The price of the newly listed Uganda Clays shares soared by more than half due to renewed interest in the company’s shares by investors at the Uganda Securities Exchange.

Increased demand for the shares follows the company’s shares-split last week. The split, stimulated the trading of some of the freshly listed 900 million at Shs110 each, up from nine million, at Shs11, 295 as of last week.

The increased shares also shored up trading at the counter of Uganda Clays Limited (UCL) by almost one hundred times last week’s volumes, an indication that investors can now buy and sell the firm’s shares with ease.

UCL’s shares opened at Shs110 on Monday but rose by 54.5 per cent to Shs170 on Tuesday. Until last week, some investors could not acquire or sale the shares because the price was over Shs11,200-considered to be too high to allow substantial exchange by investors.

As a result of their reduced price at the Exchange, sold UCL shares on both Monday and Tuesday, surged by 97.4 per cent to over 1.7 million shares, from 44,137 last week. Mr Rumbidzayi Nyabadza, the General Manager, Renaissance Capital, the stock brokerage firm that handled the share split said the new price and volume was unforeseen.

“The price has put up 54 per cent in two days, equivalent to 9,720 per cent as an annualized return. This is certainly beyond anybody’s expectations,” he said in an interview with Daily Monitor on Tuesday.

In addition he said, “We did expect increased liquidity and interest, but the outcome is simply phenomenal.” However, trading experts at African Alliance another stock brokerage firm observed that while investor interest and return had risen, the volumes exchanged on the counter are relatively low and mainly represent retail investor play. “Absence of institutional interest might signal a dislike for the company’s valuations,” the firm said in market report on September 1.

Increased activity at Uganda Clays counter has spilled a negative effect on the counter of Stanbic Bank Uganda (SBU) as investors dash to acquire UCL post split shares. The listed bank’s share price slipped to Shs220 by close of trading day, on Tuesday.

And for the first time, UCL’s trade volume surpassed that of SBU which has dominated the number one trading spot since its shares were listed at the bourse in January last year,- proving that share splits are a way to increase the amount of tradable shares on an exchange, as analysts have predicted. “The SBU price direction could be an indication that the market focus at the moment is on shares that have events happening around them,” Mr Ndyabadza remarked.

According to him, there is focus on UCL and Bank of Baroda Uganda (BOBU) because there are share splits. “Yes, it makes sense to take advantage of those events to make good returns.”

On Tuesday, BOBU whose price has risen to over Shs5500 since the year begun because of a scarcity of shares also announce that its planned share split will take place on September 8, next week.

Bank of Baroda shareholders approved a split of the company’s shares in a ratio of ten shares for every one share held (1:10) in June. The action will increase the bank’s listed shares to 400 million shares from the current 40 million hence boost liquidity at the counter.

Normal trading of the current Baroda shares at their current price will end Monday. Some stock brokerage firms and investors are however pessimistic about the increase of liquidity at the counter because majority of owners of the shares-(BOBU its self) is not likely to off load its stake in the short term.

However, Mr Ndyabadza argued that: “The sudden jump in the number of shares available to trade is good enough to stimulate activity.”

Source: © 2008 Monitor Publications Ltd