The Changing Faces of Banks in 2007

Radical changes
The banking sector has come a long way and with mergers and acquisitions in the offing as well as the emergence of near financial supermarkets the future is indeed bright for our banks.

Investors
Most investors in banks stocks have often made a kill over the last few years with splits, dividends, bonuses and price appreciations having been witnessed.

New products
The banking sector is indeed undergoing radical changes and new products are being unveiled everyday target the larger populace as oppossed to the big-mans-bank syndrome that had been evident a few years ago. Banks are now literally going to the streets to hawk their wares and sell the loans to every would be buyer with little or no requirements at all.

Interest rates and competition
Interest rates have dropped drastically as banks strive to offer cheap products to borrowers for their businesses and other needs.Competition in the banking industry is indeed evident and every new day new banks are emerging.

New Banks
Most non deposit taking institutions are now converting into microfinances and finally banks in a matter of years and the number of banks is increasing by the day.

Banking stocks
The banking stocks have continued to soar to new record highs never witnessed before as investors both local and foreign rally to buy them.

Cross border trading
These banks have even dared to cross border to other regions talk of KCB in Uganda and southern Sudan where it continues to serve its customers. Others are savouring the region for strategic partners to inject new blood inform of liquidity into the system talk of Equity and Helios deal as well as Stanbic and CFC deal.

Stock broking
Other banks are craving for a piece of the stock market pie with ventures into stockbroking. NIC failed bid for the stake of the collapsed Francis Thuo (won by renaissance capital) has seen it partner with another securities dealer. Talk about slowly getting their.

Asset Finance
Asset finance is becoming the talk of town with considerably lower interest rates charged by banks for the same. This was started by NIC bank but now adopted by NBK, KCB, Equity, Family Bank, Stanbic and the list is growing.

...and the changes go on...

Of Investment Groups and Target Products

Investment Club
Now that it is evident that over the recent past, the number of investment clubs also called investment groups has grown phenomenally. An investment club is a group of individuals who meet on a regular basis for the purpose of investing money.

Contribution
The invested sums can be as little as $10 a month. The first investment club on record dates back to the 1800s in Western America. Various online communities devoted to this type of investing have recently emerged and have contributed to the personal investing boom in the United States. One of the reasons that people come together in investment clubs is to learn how to invest. While investment clubs are commonly organized with members contributing money and investing as a group in a single club portfolio, members of other self directed Investment clubs simply meet and learn about investing but invest on their own. With the advent of computers and the internet investment clubs have also moved into cyberspace.
Investment clubs are generally formed as general partnerships, but could also be formed as limited liability companies or limited liability partnerships (in states that allow them). more on wikipedia

Membership
Joining one has become almost the norm. An investment club is typically a group of family, friends or co-workers who have teamed up together to pool funds and invest them collectively in assets such as the stock market and real estate.For an investment group to work, it is important for you to look for like minded individuals who are committed and intent on going to the next level. Look for people who want to share research and knowledge about the market. Look for people who are pursuing different careers from your own so that you can have a mix of ideas. more on businessdaily.

New Products
Equity Bank, Britak and Housing Finance have launched a product targeting these investment groupds dubbed Hekima Milele that ius set to radically change the way investment groups have been doing their business. Talk about a financial supermarket and its new products!

Tips
Some useful tips on starting and running a successful investment club are available. Smaple this:
-How to start a club i.e starting and running profitable investment clubs.
-Learning from the wonderful world of proshare investment clubs.
-Endeavoring to undertake better-investing.
-Australian stock exchange tips on investment clubs.

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.......

Implications of Strengthening Kenya Shilling

Kenya Shilling
The Kenya Shilling has been on an upward trend in recent past and this is attributed to the entry of foreign investors into the market that has rallied the Kenyan shilling to new highs.

New Highs
Yesterday, the shilling settled at one of its strongest positions to the dollar at a mean rate of Sh65.40, the strongest level since 1999.

Causes
The strengthening of the local currency against the US dollar was steered by increased foreign exchange inflows amid subdued demand from:
1.Foreign Investors rallying to invest at the NSE including top Wallstreet operatives.
2. Offer by Helios, an international investor, last week by buying a 24.99 per cent stake in Equity Bank worth over Sh11 billion.
3. This was followed by news that France Telecom would acquire a 51 per cent controlling stake of Telkom Kenya worth Sh26 billion.
4. Increased demand for the shilling from exporters to meet end month demands.
5. Increased tourist reception into the country with projections likely to go higher with the festive season approaching despite the impending electioneering period.
6. Strategic positioning by various players before the anticipated upcoming Safaricom IPO.
7.Other variables

Players in the forex market include:
-Interbanks
-Commercial companies
-Central Banks
-Hedge funds
-Retail and forex brokers
-Investment management companies

Effects
1. Exporters will face challenges of penetrating foreign markets as exports become expensive
2. There will be a significant reductions in local revenue terms for exporters.
3. Kenya will become expensive to trade with.
4. Net foreign exchange earnings will go down.

Financial Market Engineering in Kenya

Tremendous changes are occurring in financial markets and trading organizations as a result of technology developments. These advances in IT have created significant opportunities for;
1. Economies of scale,
2. Reduced transaction costs, and
3. Enhanced trading liquidity.
New market systems also create major risks for exchanges and their operators stemming as a result of competitive forces unleashed by open, global markets and real-time access.

Engineering questions to address for each of these three areas are:
1. Microstructure – What auction or other negotiation protocol serves in the interest of participants? Which protocols are innovative and applicable?
2. Infrastructure – How can the market protocols be implemented in a decentralized, highly scalable IT architecture? What technologies should be used? Which capacity and functionality demands have the highest priority?
3. Business governance structure – Who controls the market as an organization, and enhances its financial performance? What are the promising revenue models? Which services should be offered to whom at what price?

Since the outcomes from configuring these three dimensions today are still imperfectly understood, designing markets remains a challenging task. The approach of market engineering proposes that the design of electronic markets be approached holistically. Holistically means that all areas of the design – the microstructure, the infrastructure as well as the business structure – are simultaneously considered. The configuration of these different dimensions of a market is
guided by a structured engineering process.

As we strive to enhance the performance of our financial markets, it is imperative that we consider:

-Best Execution – What do we want from our markets?
-Innovative Products, Trading Mechanisms, and Services for Electronic Markets;
-Performance of market platforms;
-Auction and matching techniques;
- Models, methods, and tools for financial market
engineering; and
-Integrating mechanisms for multiple market modalities.

Growing our emerging market is challenging but realizable. Lets build our financial markets to status of the top dogs!!!

Trancentury Going Public?

Just read a post by ribacapital on Transcentury that it is undertaking a private placement for 4,213,500 shares representing 17.7% of the company at a price of Ksh.712.00 per share.

More by ribacapital...

The Rise of Freeconomics

Now that our political arena is awash with news, informations and inundations on the the boys in blue and orange many are left dazzled.
As the day draws closer, many free-economists are churning various theories of the free things we are likely to enjoy come the general election.
Free...
Sample this:
-Free food for the needy
-Free primary and secondary education
-Free clothing for those without
-Free transport vouchers for the poor
-Free ports
-Free country
and the list goes on and on...

Well i am not alluding to any political inclination, but i am disturbed by the freeconomics being churned out in the bid to lure the electorate at the expense of real issues that bedevil our economy and investors at large.

Sample this from Moore's Law
"What happens when things get (nearly) free?" His answer is that you waste them,You use them profligately, extravagantly, irresponsibly. You shift out of conservation mode and get into exploitation mode. You do crazy things ...like promising the average email user that they'll never have to delete another message to conserve space. We will all learn how to waste newly abundant resources, retraining our minds to ignore our instincts about costs and scarcity.

Just a thought!!!!

Financial Sector Deepening Panacea for Emerging Markets

Financial deepening
This refers to the increased provision of financial services with a wider choice of services geared to all levels of society.It also refers to the macro effects of financial deepening on the larger economy. More financial deepening generally means an increased money supply. The more liquid money is available in an economy, the more opportunities exist for continued growth.
It can also play an important role in reducing risk and vulnerability for disadvantaged groups, and increasing the ability of individuals and households to access basic services like health and education, thus having a more direct impact on poverty reduction.

Financial Markets
In economics a financial market is a mechanism that allows people to easily buy and sell financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other items of value at low transaction costs and at prices that reflect the efficient market hypothesis. Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.

Growing Interest in financial deepening
There has been a growing interest, around the developing world and economies in transition, in the promotion of rural financial deepening. The hope of better risk sharing, more efficient allocation of capital, more productive investment, and, ultimately, higher standards of living for all is propelling the drive for stronger connections between financial systems across the world.
Moreover, attention has gradually shifted, from the earlier exclusive emphasis on credit,
towards a growing recognition of the importance of different types of financial services,
including:
-Deposit facilities and similar means to accumulate liquid reserves and hold
stores of value.
-Payments instruments and opportunities to send and receive remittances
and to exchange currencies and
-Mechanisms to manage liquidity and cope teh risks.

Asian economies, particularly emerging markets, are taking an active part in this quest, at both the regional and global levels. At the global level, Asia's integration with the international financial system is well advanced.

Financial Integration
In the years since the 1997–98 financial crisis, Asian governments have affirmed their intention to promote financial integration at the regional level with a view to both reducing vulnerabilities and improving the allocation of savings. A series of initiatives have been launched to boost regional self-sufficiency, ranging from information sharing to financing arrangements in foreign exchange. Governments are also taking steps to deepen regional bond markets to reduce reliance on bank financing and to shelter the regional economy from the possible repercussions of future volatile capital flows originating elsewhere in the world.

Financial Sector Deepening in Kenya
The Financial Sector Deepening (FSD) Trust was established in early 2005 to support the development of financial markets in Kenya as a means to stimulate wealth creation and reduce poverty.more

Safaricom Hullabaloo

Now that Safaricom is striking the headlines every new day it goes without saying that this company has higher stakes and every investor worth his salt craves for a piece of its juicy cake.
Nonetheless, there have been contradictory information coming out from several quarters with the government determined to ensure its budget deficit is reduced with the proceeds from privatization programs.
Safaricom is expected to rake in 34B. Some however have hinted that the IPO will take place between 1st and 14 December so as to allow investors time to vote during the 27th December General Elections.
Everyone is watching and despite the recent court case by some ODM members the government's determination is unrelentless.

Kenya Capital: TPS Stock to Watch in 2008

With his avid analysis over time now MjengaKenya thinks that TPS is a stock to watch in 2008.
Given the trend that tourism in Kenya is expected to take with expectations of increased tourist in the next 5 years, this will translate to increased revenue for this company that has spread its tentacles accross east africa. TPS is well positioned to rake in higher returns and better stock prices.

Check out my earlier analysis on this company set to benefit from tourism upswing.

The Hot Seat that is Safaricom CEO

Being the CEO of Kenya'a most profitable company is no mean feat and many corporate CEO's are now envious of their unparalleled achievements and would wish to occupy this higher pedestal.

Safaricom's CEO

Michael Joseph has been at the helm of Safaricom since inception and with his contract coming to an end in the first quarter of 2008, picking the CEO of Kenya’s most valuable and successful company would appear as a big political concession that any regime would like to lose.

Succession Plan

Mr Joseph has been an asset to the firm, which has not put in place a well thought out and well publicized succession plan. The risk of losing a successful manager at a time when the company is preparing to go public would have made investors skittish. more

Syndicated Loans

Safaricom owes a syndicate of banks Sh12 billion and with the fast growth that the company is experiencing, it still needs the ability to tap both the equity and debt market for cash.

IPO

Treasury is seeking to sell 25 per cent of its 60 per cent stake in Safaricom to the public through the NSE in a transaction expected to net at least Sh34 billion and billed as the largest sale ever in the Kenyan capital market.

Telkom Kenya

Already, a number of investor including British Telkom, France Telkom and South Africa Telkom have lined up to purchase a 51 per cent stake Telkom Kenya in deal worth Sh5.6 billion. The stake is set to be transferred to the winning bidder on November 26th.

Foreign Investors Back with a Bang

Foreigners Flock NSE
Despite the recent jitters about the stock market that saw various politicians make remarks about the stock market, indications are ripe that foreign investors are not shying away from the Nairobi Stock Exchange.
Infact over the last few weeks insiders have it that foreign investors are now flocking the NSE. Their deals in some days have accounted for more than 40 per cent of the trades in a number of counters.

Blue Chips
It appears that the target of this investors are blue chips including, East African Breweries Limited (EABL), Kenya Airways (KQ), Barclays Bank (BBK), Kenya Commercial Bank (KCB), Mumias Sugar Company (MSC), Kenya Electricity Generating Company (Kengen) and recent debutant to the NSE Kenya Reinsurance (Kenya Re) amongst others.

Economic Fundamentals
It is noteworthy therefore that the re-entry of foreign investors into the local equity market is a clear indicator of the strong perception of the country’s economic fundamentals and favourable corporate earnings projections in the country despite the impending elections that has been expected to send these investors packing due to uncertainty of the election outcomes.

Political Comments
The recent reassurance by some presidential candidates on their support for the goings-on at the NSE against a backdrop of earlier negative comments on the sam market is welcome and is a positive signal to more foreign investors as well as local investors to flock the NSE in preparation for the Safaricom IPO.

Safaricom IPO
There are strong indications that various players across the global divide (From Wallstreet to Kimathi Street) are positioning themselves to invest in this most profitable company that raked in 17B profir last year and expected to beat such feats given its current products that have been positively received by customers including MPESA service. Their expansion programs are also welcome and it is a matter of time before we proudly own THE BETTER OPTION.

NSE Amidst Electioneering Frenzy

Kenya is one of the few countries in the world that has the uncanny knack of being gripped by election fever from one election through to the next national polls due to politicking amogst its leaders.

Big Investors
Traditionally the big-time investors take a wait-and-see stance during an election year and the result is sluggish economic activity, which could result in slower GDP growth. On the Nairobi Stock Exchange, which is a barometer of economic performance in the country, share prices nosedive.

Political Uncertainty
Kenya’s equity markets could face their hardest test in four years amid heightened volatility caused by political uncertainty ahead of the general election. Massive offloading of shares by individual investors in anticipation of the Safaricom Initial Public Offering could also spark market fluctuations and depress market activity.more
Already, the market is showing signs of a slow down with the benchmark

NSE Index
NSE 20Share index that tracks the performance of the 20 select listed companies, threatening to dip below the 5000 point mark.In the last one month, the NSE 20 Share index has shed an estimated 600 points, closing last week’s session at 5005.89 points compared to a high of 5611 points in early September.

Election Frenzy
The looming general election in Kenya cannot escape investors’ minds. As much as they wish to celebrate a new beginning and the anticipated Safaricom IPO, at the back of every investors mind is a dark cloud of uncertainty as to what the election frenzy will bring to the bourse.

SME Listings at East African Bourses

SMEs
Small and Medium Enterprises play a vital role in any emerging economy. In Kenya the emergence of microfinance banking has catapulted the growth of SMEs.

East African Exchanges
NSE, DSE and USE collectively the East AfricanExchanges have plans to allow the listing of SMEs through relaxation of the stringent listing requirements that characterise these marts. The tough floatation rules have hindered most SMEs from floation their shares through IPOs.

SME Listings
The listing of small and medium-sized enterprises (SME) is expected to provide more shares at the market, allowing investors to diversify their investments and help spread liquidity, which has at times distorted the valuation of some shares.The development, which will also be replicated by Kampala and Dar-es-Salaam bourses, will catapult the region into the same level with developed and middle level economies which allow listing for SMEs as a way of enhancing their contribution to the economic growth.

Regional Bourses Agree
The opening up of the regional bourses to SMEs by late 2008 was agreed on by the Kenya, Uganda and Tanzania heads of stock exchanges at the East African Securities Exchange Association (EASEA) meeting held in Kampala on September 7. This will spur the trading in the yer to be established over the counter market at these stock exchanges.

Microfinance banking set to spur economic growth

Silence

After a couple of weeks of silence in this blog due to travel and work demands i must apologize to my avid readers for some dissapointment with my postings which havent been forthcoming.

Microfinance Banking

Microfinance is a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. By helping them to accumulate usably large sums of money, this expands their choices and reduces the risks they face.

Today after reading the case of Equity bank and others seriously following suite including the hirtheto big mans banks of yersteryears that are now hawking loans and other products,i was drawn aback to the role of microfinance banking in economic growth and profitability.

Internation Year of Microfinance

Today, microfinance plays a major role in the development of many African, Asian, and Latin American nations. Its impact is substantial enough to have warranted acknowledgment by the United Nations who declared 2005 "The international year of microfinance", reminding people that millions worldwide benefit from microfinance activities.

Economic Growth

It is generally accepted that long-term sustainable microfinance programmes hold enormous potential for national economic growth and development. Many microfinance institutions have sprung up and some are already applying for banking licenses. The future is indeed brighter for microfinance with the passing of microfinance bill in parliament. more

Accollades

Microfinance institutions are indeed set to change the course of business in the world. Case studies of Equity in Kenya and the Bangladesh bank attest to this. Both institutions have already wone various accollades for their work.