2007: My Twelve Reflections

As the year draws to a close with the upcoming general elections many especially in the business cycles are taking stock of their ups and downs during the year.

1. The stock market during the early part of the year was abuzz and on a crazy upswing mode and many investors did make a kill.
2. New entrants into the stock market exclusive leage-Renaissance capital is already making inroads into the equity market with plans to invest more in stocks come the next years.
3. New IPOs slated for the year were realized but the mother of all IPOs is still being awaited and investors are bracing themselves for a bruising battle come the release. Despite the dragging court cases the governement is still determined to sell this cashcow and seal the deficit hole in thw budget that is over Kshs100B.
4. The shilling realized significant gains and is now on new highs with strong inflows from:
-Shs 26B purchase of 51% stake in Telkom Kenya.
-Transcentury continues to spur investment area with its new ideas from the spindoctors therein. It is now selling its shares to the strategic investor.
-The prospects of the dollar on the global front is dwindling
-Foreign investors flock to the NSE to get a stake in some of the blue chips and Kenya is the new emerging market where foreign investors are diverting their investments.
5. Equity continues to surprise us despite fears of imminent collapse with new profitability feats and innovative product and now the sale of 24.9% stake to Helios-a strategic partner. What more can we say it is going from strenngth to strength and their stocks might be worth your pennies...
6. The banking sector was abuzz with profitability and more is yer to come.These stocks are good buys dont you think?
7. The emergence of the pyramid schemes that fleeced many investors their hard earned monies and left many crying remember Deci, CLIP, Sasanet and many others?
8.Many investors woke up to the realization of the stock market as an investment destination.
10. Tourism earnings and prospects are good and the earnings from this sector are set to rise exponentially come the next year.
11. The economy grew by over 6% and whether this translated to more money in our pockets is subject to discussion.
12. Business Process outsourcing (BPO) the new craze in town for kenya as an emerging market and this is expected steer our country to the leagues of India and other fast growing economies.

more to come.......

Of Cross Border Listing and Cross Trading (Part II)

Cross trading is the emerging trend where investors seeking to diversify their portfolio of investments would seek to venture into other markets and invest in such available options as equity, bonds, commercial papers, derivatives and other available products in that market.

East African perspective:

In East Africa for example, Investors have been craving for the stock market pie with Kenya leading the pack with several IPOs having been significantly oversubscribed with others slated for the year expected to follow the same record trend. Over the last 5 years, turnover at the NSE has grown phenomenally from Sh2.9 billion in 2002 to Sh95 billion last year while the number of CDSC accounts that have been opened have in the last 2 increased from 80,000 in 2005 to an estimated 700,000 investors to date.

Insatiable Appetite for Investments Opportunities:

The rally at the NSE has produced millionaires overnight.Take the case of EA Cables price rally that produced all times high of around Shs 1000 per share among the other shares price surge occassioned by the unprecedented news of stock splits, dividends and bonuses declared by most companies including Barclays, ICDCI, Sasini, CMC, KCB, Cables etc. It is evident that investors are hungry for other viable stock market investments as seen with the latest trend of switching to the emergent high return promising pyramid schemes that have sprouted in every corner of this country. Sadly though, most of these schemes were scams meant to defraud unsuspecting investors of their hard earned monies as seen with the widespread closures, default rates and collapse of even the seemingly big wigs of the pyramid scheme-DECI. Most investors lost their monies and statitistics available shows that this ran into hundreds of millions.

Some investors who had sold their stocks, leading to a bear run had the NSE, are now back with whatever little they managed to salvage.

Nonetheless, the oversubscription of all the IPOs from 2006 to date is a clear testament to the insatiable investment appetite in the country. The strong returns posted by Kenyan equities listed at the NSE have not gone unnoticed with international interest in the country’s markets building up in recent years latest among this is the interest receive from top Wall Street operatives.

African Stock markets:

Africa has only 15 active stock exchanges which include exchanges in South Africa, Nairobi, Uganda, Tanzania, Botswana, Nigeria, Cairo, Malawi, Mauritius, Namibia, Ghana, Zambia, Zimbabwe, Tunisia with the regions equity markets incomparable in size to other emerging markets worldwide posting a combined market capitalisation of US$39.2 billion, excluding South Africa's JSE, in 2005. The JSE which is the 16th largest exchange in the world, had a market capitalisation of US$ 566billion, accounting for 94 per cent of Sub—Saharan Africa’s total market cap. As it is, the JSE’s market cap is 14 times larger than all the other African markets combined(Business Daily).

Cross Trading, Stanbic Experience:

The continued media hype in Kenya lead many streaming to the appoitment banks and stock brokers to have a stake in the much publicizedStanbic Uganda IPO. However, after the rigorous process of filling forms and paying for the shares, Kenyan investors were the losers as they were considered for residual shares after all the local investors had gotten their share. After the meagre share allotted came the issue of share certificates that reminds us of the days NSE was still without the Central Depository system.

Dividends:

Recently, after the wait, the arrival of the Stanbic Bank Uganda’s dividend payout cheques (7%) was an excitement to many investors though this was short-lived as those who received the cheques were surprised that the dividend almost amounted to nothing after being converted to the local currency which is of higher value than that of the East african counterparts. Further, the paying of Ksh.1,000 bank charges for cheque clearance inorder to cash the cheques proved much higher than its value, especially for most investors with minimal share allocation. This made the dividen almost worthless if not useless. With some intervention, the cahrges were readjusted as follows; amount below 1000 cost ksh 100 and amounts above ksh 1000 would cost ksh 150. Read Bankelele's experience!

Cross Border Trading:

As earlier alluded, most investors who thronged dealers offices and banks to buy Stanbic had not considered the perils of investing in another currency and all associated stumbling blocks. The company and even the Ugandan Authorities had not instituted a proper dividend reinvestment program (DRIP) that would enable investors reinvest their dividends until such a latter date when cashing them would be worth the rigor.

Most investors did not understand that cross trading is normally affected by the market performance in the market concerned as well as the fluctuations in the foreign currency rates. Read more

Kenya Re IPO Opens 18th July 2007

Initial Public Offer (IPO):
It is now official that the Kenya Re IPO opens in a week (July 18) and most investors are bracing themselves ready to jump in on the bandwagon and get a piece of this national cake.

Retail Investors:
In most IPos from Kengen, Scangroup, eveready, acessKenya etc it has been evident that retail investors are the majority and more often than not have to contend with minimal share allocations way below their applications. This is then followed by a rigorous process of seeking from refunds which more often than not leaves many a discouraged lot wishing they had not in the first place plunged into this stock markwr mania.

Prospectus:
Most savvy investors are nonetheless waiting for the release of the prospectus for them to analyze the company fundamentals and assess the company credibility as a viable investment option vis other counters trading at the bourse.

Scandals:
The the compnay is still reeling from scandals that rock it, investors are waiting with bated breaths hoping to make a kill during the first few weeks if trends i nthe stock market point upwards. The books however have been 'cleaned' though many would stilldig deep down inorder to ascertain what would have led to the firing of the MD and its close Finance Director who were alegedly involved in the corruption racket. We are waiting...

Monopoly:
Kenya Re being a Reinsurer, that insures other insurance companies is a monopoly of some sort (more like Kengen and might follow the same trend) with alot of assets in its name that would provide a solid security base though the current trend of accidents and especially the Kenya Airways (KQ) Crash might have an impact on the company that has to compensate some employees of the company who lost their lives during the fateful day. The company has good growth prospects that is likely to create excitement at the stock market.

Corporate/institutional investors:
They have been allocated a substantial portion of the offerered shares.

Allocations:
Retail investors; 47% equal to 112.8 million shares of the 240 million shares offered.

Pyramid schemes:
This year witnessed the meteoric rise in the number off pyramid schemes that latter came tumbling down with a big thud going under with millions of shillings in investors money. Those who were lucky to have gotten their money back may rush again to invest at the bourse since this schemes had led to massive sales at the NSE as crious investors hoped to rake in millions from this rather lucrative deals supposedly referred to as the viable investment schemes that offered mind bloggling returns, its sustainability notwithstanding.

Statistics:
= IPO opens on July 18, closes on July 31.
=Result out mid-August and listing towards end of August or early september.
=minimum shares for retail is 2,000 shares @ 9.50 which is worth 19000.

Parting shot:
Is it true that institutional investors complains about refunds has been heeded and they dont have to pay any money for the shares applied until they get their share allocation confirmed?