Investor Losses Mount as Cross Listed Firms Suffer in East African Markets – The Ankole Times

Investor Losses Mount as Cross Listed Firms Suffer in East African Markets

Wednesday, November 1, 2023

The losses experienced by a number of investors is increasingly becoming a challenge to the stock markets across East Africa.

Investors in cross-listed companies suffered a 10.5 percent revenue loss in the 2023 second quarter, which is equivalent to UGX 2.2 trillion, according to Capital Markets Authority data.

The loss was largely driven by a drop in the market capitalization of five cross-listed counters, among which included Centum Investments, East African Breweries Limited, Kenya Airways, KCB, and Equity Bank.

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Their persistent downward drag on the Uganda Security Exchange is increasingly agitating investors, whose search for liquidity has been difficult in a region whose stocks are largely dominated by institutional investors, who mostly hold onto their stocks, thus making the markets relatively inactive.

Cross-Listed Firm Market Capitalization Change
Centum Investments Decreased
East African Breweries Limited Decreased
Kenya Airways Decreased
KCB Decreased
Equity Bank Decreased


“They are the counters with the biggest capitalization on the exchange and therefore any slight volatility that happens to them largely affects Uganda Securities Exchange’s valuation,” said David Bateme, a researcher at Crested Capital, a local broker.

Companies across East Africa have been seeking to bolster their funding by cross-listing their counters.

However, the volatility in regional markets has not worked for Uganda, whose investors continue to lose substantial sums of money in cross-listed stocks.

The USE is currently facing challenges to maintain a sufficient number of active counters, given that many counters have not returned dividend payments in years.

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The 10 locally listed counters have all declared their dividend position for the year ended 2022, according to Crested Capital, which, in some way, has fostered some liquidity in the market and improved shareholder returns, especially for stockholders in Umeme, National Insurance Company, and Stanbic.

Locally Listed Counter Dividend Status
Umeme Declared
National Insurance Company Declared
Stanbic Declared
dfcu Not Declared
Uganda Clays Not Declared


However, investor returns were wiped out due to low returns from dfcu and Uganda Clays, which dropped by 54.92 percent and 5.53 percent, respectively, during the period.

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Data from Crested Capital indicates that domestic market capitalization, however, withstood the volatility to increase to UGX 7.59 trillion by the close of Tuesday, from UGX 7.3 trillion in June due to significant growth on five locally listed counters, among which included MTN, Stanbic, British American Tobacco, and Umeme.

Locally Listed Counter Market Capitalization Change
MTN Increased
Stanbic Increased
British American Tobacco Increased
Umeme Increased


The changes in market capitalization are drawn from changes in the prices of domestic counters.

Many counters have registered declines in price, while those that have recorded increases have not been significant to drive desired growth.

Volatilities in the region have seen investor wealth on cross-listed counters decline, with Uganda registering a drop of 23.13 percent in the first 10 months of 2023, while Kenya registered losses of 12.2 percent on the Nairobi Securities Exchange.

However, stocks in Tanzania gained by 10 percent, while the local indexes in Rwanda gained by 3.46 percent.

Cross-Listed Equities:

Companies cross-list to find new investor bases and increase their ability to raise low-cost equity financing from a large pool of potential investors.

It also helps to improve market liquidity, which lowers operating costs for investors and lowers obstacles to foreign investment that stem from control and a lack of sufficient information.

This eventually increases these companies’ overseas sales since potential customers abroad become more aware of the performance of the company through share trading.

Research indicates that there is a trade-off when it comes to listing a company abroad, though.

“Stock returns of listed firms are volatile and vary depending on factors such as microeconomic variables that are specific to a given firm like earnings-to-price ratio, book-to-market equity, leverage ratio, market size, and market beta, or other factors like oil prices, market consumption, market index, term structure risk premium, inflation, and production in the industries,” a 2022 research paper from Kenyatta University says about cross-listed equities’ performance in the region.

The paper further notes that because there are no cheap stocks in the regional market, excess returns cannot be generated.

However, every investment carries some risk, and in order to optimize profits, investors must sell high after purchasing low, the researchers note.

Cross-Listed Firms Affecting Stock Markets:

KCB, Nation Media Group, Equity, Centum, Kenya Airways, and East African Breweries Limited are a few of the cross-listed businesses that are shared with Kenya.

The limited quantity of cross-listed shares available for trading has negatively impacted these firms by causing a decline in activity on their counters.

Investors are also being negatively impacted by variations in the growth of regional stock markets, manual settlement processes, and the presence of multiple currencies pegged to these markets.

Due to the fact that the majority of these stocks’ shareholders are based in their primary markets, this hinders large trade in secondary markets such as Uganda, stalling illiquidity.

Because of this scarcity, traders are not trading, although analysts point out that this can be fixed by automating trading infrastructure to enable smooth trading.

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Paul K Mugabe is a news analyst and commentator who has been gracing the pages of The East African Central Press Syndicate with his thought-provoking, and often eyebrow-raising, insights. - mugabe [at]
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