Last Updated: Wed Sep 12, 2012 11:55 am (KSA) 08:55 am (GMT)

Patience and dodgy deals needed to cash in Sudan bourse gains

Brokers say it complicated to send gains from bonds or shares abroad by changing pounds into dollars on the black market, but it was still worth it. Authorities turn a blind eye to avoid upsetting foreign investors. (Reuters)
Brokers say it complicated to send gains from bonds or shares abroad by changing pounds into dollars on the black market, but it was still worth it. Authorities turn a blind eye to avoid upsetting foreign investors. (Reuters)

Sudan’s stock market has succeeded in boosted trading, with the help of Oman, after launching a computer-based trading system in January, ending the era of scribbling prices on white boards.

The bourse’s total trading volume rose to 1.24 billion Sudanese pounds in January-May, compared to 0.8 billion Sudanese pounds a year earlier. At least nine new firms have listed their shares since January.

Abdul Rahman Nadir is the Deputy Director of Khartoum’s Stock Exchange.

“Khartoum Stock Market has moved from manual trading and circulation to electronic trading and circulation. We started working through the electronic trading as of January 2012. It is observed that after the first two months of the operation a considerable increase occurred in the market activity. Monitoring the circulation from January up to now compared to circulation in the same period of last year we found that there is a considerable increase, over 120 percent,” said Rahman Nadir.

But hopes that the computerized bourse would give foreigners better access have yet to be realized. Traders say the system has not been connected yet to banks, brokers and the central bank. Dealers sign off deals on papers after the daily one-hour session.

The central display screen broke down after just a few months, a common sight in Sudan where technology spare parts are scarce due to the U.S. embargo and dollar shortages.

“Though the monitors behind me being out of order, we have now ordered new monitors and they will replace the existing ones with the new and modern monitors. Several monitors will be installed outside the Khartoum Stock Market head office to enable investors and Sudanese people determine the activities of the market,” said El-Tayeb al-Jaali, an IT official at Khartoum’s Stock Exchange.

Sudan lost most of its oil production when South Sudan became independent a year ago. Oil was the main earner of state revenues and foreign currency needed to fund imports, and the central bank has made it almost impossible to convert shares or bonds denominated in pounds into dollars for transfer abroad.

Brokers say some Gulf investors have been trying to pull their money out of the small bourse where shahamas - short-term Islamic bonds - account for 90 percent of trading.

Some brokers offer just one legal route for foreigners who want to get out of the Khartoum bourse and reduce their exposure to the country’s economic chaos: reinvest the dividends paid out in local currency, into real estate for example, and wait for better times to take your money home.

But there is also some evidence that investors from Saudi Arabia and other oil-producing Gulf countries have not given up on Sudan, despite the country’s loss of three-quarters of its oil production when South Sudan became independent in July 2011.

With Islamic bonds guaranteed by the central bank, almost 2 million bonds were traded in the first five months, compared with 1.2 million in the same period a year ago - and around 20 percent of shahamas are held by foreign investors, according to bourse estimates.

Desperate to raise money, the government and state firms have increased their annual bond returns to up to 22 percent, from 14 percent a year ago.

Lured by double-digit yields, investors from the Gulf in particular bought into government bonds when Sudan was awash with oil revenues that also fed a construction boom in Khartoum.

Brokers say it complicated to send gains from bonds or shares abroad by changing pounds into dollars on the black market, but it was still worth it. Authorities turn a blind eye to avoid upsetting foreign investors.

Al-Shafei Imam, a financial analyst based in Khartoum says various market factors have made it difficult for investors to make good profits in the country lately.

“After the international financial crisis and South Sudan’s secession as well as the shutdown of south Sudan’s oil production. All this has an impact on the general budget; The Sudanese pound declined against the U.S. dollar. This had a huge impact on the number of investors and their desire to invest in stock market,” said Imam.

“The investors bring hard currency but this currency will be transferred into the Sudanese pound considering that the investment in Khartoum Stock market is in Sudanese pounds. Such investors when they come to sell and reimburse their money in the bourse they will lose a lot. For instance 10 U.S. dollars will become only 5 when it is reimbursed. This directly affects the number the investors in the Sudanese bourse,” Imam added.

Sudan is boosting its gold production to replace the loss of oil. Much of the output comes from artisan diggers who offer it openly on the Khartoum gold market.

After years of construction-fuelled lending, the foreign banks now wrestle with sluggish retail demand, spiraling inflation and restrictions on dollar transfers.

Bank of Khartoum, the biggest privately owned bank, has stopped arranging corporate bonds due to high default risks. Even so, it plans to open 15 new branches across Sudan this year.

The Sudan pound’s sharp decline has provided some lenders with windfall foreign exchange gains, bankers say. Bank lending totaled 21.5 billion pounds ($4.7 billion) in June, similar to previous months, according to the latest central bank data.

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