Despite Raging Bear Run at NSE, All is not Lost

As the stock market reels under the global financial crisis, contrasting with the bull run realized in early 2007, and lack of investor confidence, a group of investors are feeling most of the heat with their stocks plunging below issue prices. Never mind the fact that some of the victim companies surpass their industry average performance and experts forecasting a bright outlook.January analysts report card gives NSE an empty return.

New IPOs
As most analysts expect more Initial Public Offers of most companies this year, Investment advisers, brokers and investors alike might be taking a back seat before venturing to take up the Offers for sale coming their way.Kenya Pipeline is set to be made public(read an analysis by Bankelele) In fact the Government offered papers are now more secure and give better returns on Investments and this might have informed the issuance of the Infrastructure Bond by the Government mid this week.
Kenya has budgeted over Sh51 billion in infrastructure bonds comprising Sh33 billion and Sh18 billion through a debut international sovereign bond and long term domestic bonds respectively to finance rehabilitation and expansion of the road network.At the onset Treasury has issued a Sh18.5 billion infrastructure bond.Potential investors expected to take up this issue include commercial banks, insurance firms, pension funds and private firms.

Market Performance
Overall, all investors at the Nairobi Stock Exchange have lost considerably if the market performance gauge —the NSE 20-Share Index— and market capitalisation are anything to go by.The index has been oscillating around the 3100 and 3500 mark and the psychological 3000 mark might surpassed what with the low investor confidence, considerable erosion of the investments in most counters and low trade turnovers. The bear run might persist butr not for long as it is a cycle like in any other market of the world.

20 Share Index and NASI
In close to 3 years, the index has slid from a high of 6161 points recorded in February 2007,opening levels of 5016 points for 2008 and peak of 5445.66, on June 9, and the NASI has declined by 41.13 per cent from a peak of 116.243 to 68.52 in the same period.

Global Financial Crisis
The global financial crisis has exacerbated the situation as foreign investors, who were expected to cushion the stock against any panic sale, have joined the retail investors in offloading the stock to consolidate their investments and probably explore other possible investments in other emerging market that promise to retunr good earnings on investments.

Strong Fundamentals
The above notwithstanding, the Kenyan financial market is still growing stronger by the day and though the effects of contagion might be felt, it is not all that bleak a future after all.
A company like Safaricom that entered the market with alot of expectations amongst the investing public remains fundamentally strong,though its shares have slid below the Sh5 offer price since they debuted at the NSE on June 9 this year, and oscillating around sh 3 by the end of January 2009.

Most Profitable Company
Safaricom is currently ranking as the most profitable listed company in Eastern Africa, whose only undoing has been the huge supply of the 40 billion listed shares into a market that previously had a mere 15 billion shares which brings in a case of poor structuring by the investment advisors for the IPO or the greed to raise so much money from the public that would stop at nothing to acquire the company.

Profitability
Safaricom saw its pre-tax profit rise to Sh8.9 billion for the six months ending September 30 last year, up from Sh8.7 billion recorded over similar period in 2007, is strong since it controls about 80 per cent of the market and is operating in a growing industry—Information and Communication Technology.

Regional Comparison
Compared to its regional counterparts, the NSE has registered the biggest loss so far since the beginning of the year.

Grand Corruption and Grand Rogue Brockers on the Loose

The BD has a detailed story of the simmering wars between them and the Capital Markets Authority over regulatory measures taken to stamp more authority in order to ensure that investors confidence at the market is restored.The licensing war has seen the exit of CMAs Chairman.

Undervaluation
You may recall that currently there has been jitters in the market over the supposed undervaluation of various counters as well as the reluctance of various foreign investors to remit their cash for investments in the emerging market.

There is more than meets they eye in this saga. For a long time CMA has been a toothless bulldog in hibernation.

With various cases of grand corruption including the Triton saga confidence in our emerging market might be waning by the day and more still needs to be done for investments opportunities to attract rallied prices and increased attention in 2009.

Triton Saga
The case of Triton and Kenya Commercial Bank loan has led to price scare for the counter at the stock market as the mystery of missing millions deepens by the day.
The Kenya Commercial Bank has sued Triton Petroleum Company, under receivership, for Sh2 billion guaranteed through various debentures to import crude and refined oil to the Kenyan market.

7 Billion
The lump sum is part of Sh7 billion the oil dealer owes other banks among them Eastern and Southern African Trade and Development Bank and a chain of oil companies.

Convergence
Bankers could soon be allowed to provide a diverse range of financial products including insurance services, if draft amendment proposals to the Banking Act prepared by Central Bank (CBK) are approved by the Attorney General.more

Emerging Stock Market Trends in 2009 (Part I)

As we move forward a look at the African stock markets amidst the contagion of the Sub prime Morgage crisis that emanated in the US might not be that rossy after all. The Capital Markets Authority did make a case for highly capitalized financial institutions and risk based supervision approach amongst other recommendations in view of the crisis.Business confidence did slide as most companies review their investment plans and strategies in 2009.

Global Financial Crisis
The year 2008 in global financial markets has been one of the most volatile since the 1930s.The last serious bear market originated in Asia in 1997, but this 2008 crisis originated in the US.

Currencies
During 2008,emerging market currencies weakened against the US dollar as a result of
the rush to the US dollar and US Treasury instruments.Investors sought “safe havens”
and US Treasuries were considered the safest haven.

ILower Interest Rates
Recognising the severity of the credit crunch,in October major developed and
emerging central banks lowered interest rates in an unprecedented globally coordinated monetary policy effort.This was followed by the implementation of fiscal stimulus measures and loosening monetary policies from governments and central banks in developed as well as emerging markets. Thus far, more than US$1 trillion has been pledged by governments around the world to rejuvenate their domestic economiesincluding China, the US, Germany, the UK, Taiwan, Spain, Japan, South Korea,Russia, France, Australia, Hong Kong, Singapore and Malaysia.

Fastest Growing Economies
It is expected that the BRIC (Brazil, Russia, India and China) economies to continue to be akey driver of global economic growth.They are among the fastest growing economies in the world. The four markets together account for more than 40% of the world population. Domestic demand growth also remains robust. Moreover, Brazil and Russia are resource-rich countries and although there has been a recent fall in commodity prices, the longer trend for commodity prices is to increase and these countries will benefit from global demand for oil, steel, aluminum, pulp and other commodities.China continues to take great strides towards becoming a major global player.

Capital
Capital availability is the key question for emerging markets in 2009.Those who have it should do well.As for those who don't - it may be better not to ask.

This year is not going to be easy for the developing world. Lower commodity prices and slumping Western economies will damage growth. But with the United States, Western Europe and Japan all in recession and unlikely to emerge quickly, whatever growth there is in the world - not much - will be concentrated in emerging markets.

Emerging Market stocks
Given the steep market decline, investors have begun to shift their focus to the
increasingly attractive valuations in emerging markets.
NSE Chairman alluded that assets at the NSE are highly unbdervalued due to the persistent bearish trends that have failed to attract investors amidst current inflation and increase in the cost of living. Most investors at the NSE are retail.Uncertainty in the global financial markets is also suspected to be fuelling the investors’ jitters, with the deepening recession putting into doubt the chances of a quick recovery of stock markets.

2009 Outlook
While it is believed that the longer-term outlook for emerging markets remains positive due to the relatively strong fundamental characteristics and faster growth rate than theirdeveloped counterparts, 2009 is expected to be challenging. We can expect more volatility in view of slowing growth and recession concerns in major world economies,volatile exchange rates and commodity prices, and a global credit crunch.
Investors should brace for lower returns in the first quarter of the year 2009.

Africap Offloads 15M Equity Shares after 5 Years

5 year period
The expiry of the 5 year lock in period where initial shareholders of the company (This was placed on ther principle shareholders of the company when the bank wenbt public in 2006).The principle shareholders were not to sell their shares until after August 2008 when the period would expire for Equity. The expiry of this period saw the opening of a window of opportunity for Africap to offload its shares though three months latter in December.

Shares
The firm sold the shares for Sh2.5 billion, reaping one of the highest returns from equity investment in Kenya over a five-year period. AfriCap was one of the seven large shareholders, who the Capital Markets Authority (CMA) had barred from selling Equity Bank shares before August, 2008.

Equity Shareholders
-Private Equity firm Helios EB held 24.23% of the bank’s shares by end of March 2008
-British American Investments-10.73%
-Dr. Mwangi-5.3%.
-Mr Nelson Njoroge 6%
-John Mwangi 4.58%
-Africap 4.02%
-Equity Bank’s Employee Share Ownership Plan (ESOPs)held 4.02 per cent.
-The rest of the shareholders in the bank had less than 2.93 per cent shares.

Benefits
Over the years Equity has split it shares, issued dividends and bonuses and continued to post strong profit margins alongside receiving major local as well as global awards in microfinance as well as innovative banking.

Expansion
In Kenya the Company continues to expand its customer base, branch network and ATM machines to serve a wider clientele Recently the company enterred into stock dealerships with the listing of Safaricom IPO alongside its insurance products and real estate development loans available to its clients. The company also acquired 24.9% of Housing Finance successfully enterring into the housing and property development market.
Equity Bank closed 2008 as the only stock at the NSE to post positive returns oscillating between Ksh 155 and 176 by end of December 2008.

Financial supermarket
Equity is endeavoring to become a financial supermarket of sorts with its diverse poducts lines and synergetic engagements but more still needs to be done to harnsaess these opportunities for the betterment of its services.

Parting shot!
Apart from long ATM queues amidst continually broken down ATM machines, hectic banking hall escapades, Overworked staff, and seemingly swelling cleintele base that may not be sufficiently served by the bank, Equity still rocks and its shares are set to go places in 2009!

Media Bill and all the Fuss

The media Bill that had generated alot of controversy and near-personal-attacks and counter accussations has cooled down thanks to a directive by the president to the Minister of Information and Communication and the Attorney General to review the contentious clauses of the Bill and prepare a paper for Cabinet and probably parliament for review and amendment.

Safaricom CEO on his part (Supports the Law) envisages a situation where companies will issue annual reports, prospectuses and other documents online alongside official email communication. More still companies like Kengen and Safaricom with hordes of shareholders many have a reprieve by sending electronic mails to their clients including dividends by MPESA.

More analysis on the meda Bill by Bankelele...