The Allure of NSE Growth Despite Electioneering Politics

20-share Index
It is noteworhty that the Nairobi Stock Exchange (NSE) came from an earlier 10% plunge this year to exploit one of its most prosperous years of the decade with the 20-Share Index, rising to above 6,000 points at one point.The phenomenal growth of the 20-share index, a reflection of the investors' growing wealth, is expected to continue into the New Year as the capital and financial markets shed fears of political uncertainty, expected to end with the December 27 presidential polls.

New Listings
This year's stock market trade was continually dominated by the events of 2006, which saw the successful listing of the Kenya Electricity Generating Company (KENGEN). This warmed the once dormant market and brought in 250,000 first-time investors.The NSE owes its milestones this year to the increased market confidence, exemplified by the coming to the market of family-owned businesses. The listing of the Scangroup, a multiparty marketing, advertising and research firm and Access Kenya, enabled the NSE to diversify its source of income and grow its market capitalization to new heights, with the later becoming the first ICT company on the bourse.

Panic Selling
The market took a mid-year beating from political activity this year with the 20-Share Index plunging by 9.24% due to panic selling of shares, mainly by the first-time investors who did not understand the meaning of market correctional activities.The June market plunge initially seemed to be a bad precedent but it came as a blessing in disguise as foreign fund managers, who had exited the market in the mid-1990s, and had been watching the market from the sidelines, came back rushing to buy the shares.

Collapsed Stock Broker Replaced
Investors panicked after the market regulator took action against Francis and Thuo Partners, one of the oldest stockbrokers, which was found to violate trading rules by using investors' funds without consent.Mr. Francis Thuo was replaced by Renaissance Capital, which purchased the seat at Ksh420 million. The money was used to partly pay off investors who had lost money with the collapse of the rogue investment firm. The NSE paid up over Ksh.200 million.

Investor Numbers
The number of investors at the NSE rose to historical levels this year to hit 750,000 compared to the 80,000 investors who traded at the NSE in 2003. The NSE, however, estimates that only 100,000 shareholders trade actively. NSE still faces stiff challenges, especially on investor education, a portfolio which falls with the market regulator, the Capital Markets Authority (CMA). The NSE reached its decision to sell the vacant seat to the Russia-registered Renaissance Capital in a bid to deepen the capital market in Kenya, by bringing in foreign capital.

Renaissance Capital and Morgan Stanley
RenCap ecured a stockbrokerage license from the CMA, allowing it to enter the growing market in Kenya, while one of the world's greatest investment banks, Morgan Stanley, also gained entry into the Kenyan market, thanks to the pending Safaricom listing.
Morgan Stanley partnered with Dyer and Blair Investment Bank to win the coveted bid for transaction advisor for the Safaricom Initial Public Offer (IPO), which is expected to be the next big bang in Kenya's capital market.The mega deals which dominated the NSE in 2006 trickled over into 2007, constantly putting bourse on a steady growth path and shaping the market activity.

Kenya Reinsurance
State re-insurer, Kenya Reinsurance Corporation, statutorily allowed a 30% share in any insurance deal in the market, also came to the market this year, bringing on board a hoard of fresh investors, both local and foreign, who came to profit from the June meltdown.

Market Capitalization
This year, market capitalization increased to historical levels, from Ksh112.5 billion in 2002 to Ksh732 billion in mid 2007 before peaking at close to Ksh800 billion in December.
The 20-Share Index has also stabilized at an average of 5,500 although it breached the 6,000 mark within the year before taking a deep plunge due to political volatility. The growth of the share index from 1, 364.85 in 2002. The index stood at 5,332.03 as of 11 Dec.
The share index shed nearly 600 points in October this year, closing the second week of the month at 5005.89 points compared to a high of 5611 points in early September.

Scangroup, Equity, PTA and Barclays
The listing of 69 million Scangroup shares, the Equity Bank placement in the market's main investment segment, the listing of the PTA Ksh1 billion bond, the listing of Barclay's three-year corporate bond of Ksh5 billion, played as major movers of business.

Banks Profitability
Stock market analysts say the first six months of the year was dictated by the high after tax profits posted by the listed commercial banks increased.

Parting Shot
The new year portends new growth heights for the NSE as foreign investors flock into the Kenyan market after a decade of shying away. This is a clear indication that Kenya as an emerging market is going places.

Don't be left out!!!!

The Kenya that was in the News

Kenya News:
This week has seen various occurrences i nthe newsfront some political others business. Taking about politics the August House dramatically shot down two government sponsored Bill that sought to increase the number of MPs in parliament through 40 new constituencies and 50 new nominations seat for women.
In Business, as others focused on Safaricom IPO and its attendant problems, others were taking about Mergers and Acquisitions amidst new profitability feats realized by some corporate bodies and much more.

Kenya Parliament:
Acrimony, hostility and bitter exchange of words characterized debate yesterday's debate when the two bills were brought into the house after a morning of lobbying amongst themselves by the goverment side. When the bill was tabled a rather full house parliament was deserted as MPs walked out of the House causing a quorum hitch and when division bell was rang only 95 MPs were there , 50 short of the required 145 (two-thirds).

KenyaWomen:
The dramatic debates that characterized the House when this bill was brought were fun to watch and i couldn't help but wonder where politics of ODM and NARC went to as men ganged up against the women literally (with few excepions though) to shoot down the bill that would have seen the womenfolk get 50 free nomination slots in parliament-without going through the elective process. On the sidewalks i wondered aloud how women would want equality and the likes while asking for favors without fighting it out with men in elective posts. Do they expect the men to dole these free seats just like that especially with their majority vote in parliament?

Kenyan Constituencies:
The other bill that would have seen an increase in the number of constituencies by 40 new constituencies was also shot down on technicality as the requisite two-thirds majority coudnot be raised when the Division Standing Orders of the House can again be introduced 6 months latter which means that elections will be held and women will have to fight it out for more seats for themselves whereas there will be no new constituencies for those who have been waiting with bated breathes.

Kenyan MPs:
The Kenyan MPs have been described as a selfish lot, that would increase their salaries and allowances without bating an eyelid. As you might not be aware, the Statute Law (Miscalleneous Amendment) Bill which seeks to inter alia ratify a pay cheque for MPs as hefty gratuities at the end of current parliament was quickly withdrawn from the order paper amidst the hostility that saw some bills rejected. Talk about parochial selfish interests? what more do we need to know?

Kenyan Fourth Estate:
The news gatherers became the newsmakers as in a rare show of solidarity and unity (Except for KBC Journalists who abhorred the silent demonstration, dont know why???) they took to the streets in a dramatic and the most eloquent of ways-Loud Silence-With their mouths and microphones gagged with masking tapes symbolic of th gagging of the media by the current controversial Media Bill. From local media moguls, leading newcasters, print, radio, cameramen, reporters, mass communication students and supporters as well as foreign media houses, they all hit the streets to petition the president not to ascent the bill.

Kenya Politics:
Politics is a dirty game or so they say and here there are no parmanent enemies or friends. Now this is evident as the politics of the orange gone bitter and the flower about to dry up emerge. One mans woos is anothers blessings and as ODM-Kenya moved house to ODM the original outfit, Kalonzo Musyoka, Ojiambo and Maanzo's team were taken to the drawing board. Moi is closely working with Kibaki, what with the new appoinment as the goodwill ambassador of peace to Sudan. Uhuru is loking for new alliances and sticking his guns in KANU with new work relations with Biwott's Team despite the earlier bitter vourt debacle-Enemies turned friends.
Kibaki's is laughing with more votes to him as the teams fight it out as he hits the road for more votes while dishing out new districts, characteristic of the Moi regime. The dust is yet to settle, politics of oranges going bitter and flowers drying up continue as the dust continue in the haphazard manner the politics of 2007 are indeed entertaining to look at! we remain waiting!

Kenya Business:
Profitability: There are reports that Scangroup Limited has seen its half-year pre-tax profits increase by 30 per cent to Sh116.6 million, up from Sh89.6 million recorded last year due to 54 per cent growth in billings by the advertising and public relations giant and earnings achieved through major acqusitions in advertising firm Redsky— in late 2006 and early 2007. More...

New markets: ScanGroup is also set to enter the Nigerian market by end of the year as growth in the industry peaks, raising investor expectations for better performance in future[More]

Safaricom IPO: The never ending debacle of the Safaricom IPO resurfaced again after the problem sorrounding its shareholding and Mobitelea Ventures Ltd 5% stake acquired in a mysterious circumstance. This time Hon Raila or if you may wish ODM, promises to halt the process in court even as the Treasury continues with the tendering process of the advisory team with yersterday's opening of the technical bids for consultancy services.

AccessKenya contracts: AccessKenya another recently listed firm has struck an interconnectivity agreement with Safaricom that will open the biggest and most lucrative voice traffic to this newly listed firm within Kenya.

Rights Issue: NIC Bank has appointed its investment bank subsidiary, NIC Capital, to act as the lead transaction advisor for its upcoming rights issue as well as Kestrel Capital and Dyer & Blair Investment Bank as the lead stockbrokers for the plan to raise Sh1 billion by selling new shares (rights Issue) to existing shareholders. The money raised will fund the bank’s expansion plans and shore up its capital base. More here...

Expansion/Rights Issue: Olympia Capital Holdings is set to embark on an ambitious expansion plan after the Capital Markets Authority (CMA) approved its plans to raise over Sh400 million through a rights issue.The creation of 30 million new ordinary shares will give existing shareholders the right to purchase 3 shares for every 1 share. More
Coldtusker enumerates more on how to buy shares under a rights issue.

Upgrading: Meanwhile, Olympia Capital Corporation (Botswana) has been granted approval to migrate from its venture capital board to the main board. This effectively means that the company, which is 27 per cent owned by Olympia Capital Holdings (OCH) Kenya, ceases to be classified as a "speculative" investment on the Botswana Stock Exchange. More

Projects: East Africa Portland Cement Company (EAPCC) will shift its energy source from electricity to coal to cut down power bills and operation costs.The move by the cement maker follows recent discovery of coal deposits in parts of Kenya[Here]. Further, EAPCC has launched a Sh1.6 billion project that will double its production capacity in the next one year. The investment comes amid confusion whether the company and Bamburi Cement Ltd, intend to merge to keep off stiff competition.

Mergers/Acquisitions: There were reports that Kenya’s two largest cement producers East Africa Portland and Bamburi have kicked off a process that may see them merge into one of Africa’s biggest manufacturer. Sources say that the two companies have tabled the proposal before Capital Markets Authority (CMA). The law requires the market regulator to approves any takeovers and acquisition of publicly quoted companies.

...and the business world continues to churn more and more news and as investors we receive, assimilate, digest and probably act in them if they are fundamentally useful and...

Have a business week!!!