Real estate investors and buyers of Treasury and corporate bonds emerged the biggest gainers. PHOTO | BD GRAPHIC
By GEORGE NGIGI, gngigi@ke.nationmedia.com
In Summary
- Stock market punters burn their fingers as share prices at the bourse took a nose dive in a year when the fear of interest rate hike by the US Fed also depressed commodity prices.
- Sixteen listed companies have already issued profit warnings — pointing to a season of low dividend payouts for investors.
- Real estate investors were the biggest beneficiaries of the fickle markets, taking home double-digit returns by some estimates.
- All banking, manufacturing and commercial stocks were on the losing side.
Real estate investors and buyers of Treasury and
corporate bonds emerged the biggest gainers in a year of unpredictable
economic outcomes that saw commodity prices and the stock market take a
nose dive.
Most of the more than 1.2 million stockholders at the
Nairobi Securities Exchange (NSE) were on the losing side, with only a
dozen of the 64 listed companies closing at higher trading prices than
they opened the year.
A sharp interest rates increase at the end of
October offered a short window for cash holders to invest in fixed
deposits and Treasury Bills, booking returns of up to 23 per cent.
Real estate investors were however the biggest
beneficiaries of the fickle markets, taking home double-digit returns by
some estimates.
“The year has been good for real estate, we can’t
complain. I would put the returns at an average 15 per cent across the
different areas we operate in,” said the Optiven chief executive George
Wachiuri.
Optiven is a real estate company that deals in
selling serviced land parcels in Machakos, Kajiado, Naivasha and
Eldoret. The dealer was named the best company in the Business Daily’s Top100 competition for 2015.
The Kenya National Bureau of Statistics (KNBS) data
shows that rent prices for two-bedroom flats, popular with mid-sized
families, had risen by 7.5 per cent as at the end of November, while
three-bedroom maisonettes, preferred by higher-income tenants, rose 4.6
per cent.
The two-bedroom bungalow was up 5.2 per cent, according to the KNBS data.
Property prices, however, remained nearly flat,
with Kenya Bankers Association Housing Price Index (KBA-HPI) for the
third quarter of 2015 rising to 1.26 per cent from 0.2 per cent growth
in the second quarter.
Mind-boggling returns
“Real estate has served up mind-boggling returns
over the past decade. However, here again you need to be smart now, the
easy pickings are gone,” said investment analyst Aly Khan Satchu, chief
executive of data vending firm, Rich Management.
He said it is now advisable to look for land beyond
the city centres where prices are still low but with a high growth
potential.
The stock market has been outperforming the other
asset classes since rebounding from the 2011 bear run. NSE investors
made returns of 29 per cent in 2012, 19.2 per cent in 2013 and 3.8 per
cent in 2014.
The indicative NSE 20-Share Index however lost 21.9
per cent in 2015 underlining the steep drop in stock prices that saw
investor wealth at the bourse as measured by market capitalisation
shrink by Sh275 billion.
Sh27bn loss
“Stocks were a rough ride. Bonds did well because
they protected value, especially the short end,” said the Canaan Capital
managing director Rufus Mwanyasi.
Fourteen billionaire investors with a huge exposure
at the bourse chalked up paper losses of Sh27.3 billion, making them
among the hardest hit in the stock market bear run that started in
March.
Some of the largest losing stocks at the bourse
included Atlas Development which shed 85 per cent, insurance firm
British American down 56.6 per cent and Housing Finance sliding 52.4 per
cent.
Agriculture and telecommunications, which has only giant telecom Safaricom, was the only segment to have posted gains.
All banking, manufacturing and commercial stocks
were on the losing side. The banking segment was the greatest loser,
with the market value of the 11 listed lenders declining by a combined
Sh215 billion.
The value of shares listed on the NSE declined to Sh2 trillion from Sh2.3 trillion at the beginning of 2015.
Sixteen listed companies have already issued profit
warnings, indicating that they expect their earnings to decline by at
least 25 per cent — pointing to a season of low dividend payouts for
investors.
Companies have attributed the lower earnings to the
rise in cost of loans and paper losses arising from the equities market
slump.
During the high interest rate period, cash holders
were offered high fixed deposit rates by banks desperate to lure
depositors from government securities.
The opportunity to lock in the high returns was
however momentary, lasting for six weeks, as interest rates fell as fast
as they had shot up.
Yields on Treasury Bills and bonds remained higher
than the 8.5 per cent offered at the beginning of the year. The high
rate however makes it difficult for investors to sell their securities
in the secondary market, which made exchange of the papers at the bourse
un-attractive.
Anticipation of the US Federal Reserve interest
rate hike hit the commodities market with most investors opting out,
resulting in depressed prices.
Offshore investments
“Raising of the Fed rate affected all classes because the
less the money available for trading the lower the prices,” said Johnson
Nderi, corporate finance and advisory manager at ABC Capital.
Offshore investments were also said to have been
underwhelming due to other emerging markets facing similar challenges
like Kenya— again attributed to the Fed rate hike. Investors who put
their money outside the country early in the year however reaped forex
gains on repatriated cash following significant depreciation of the
shilling.
The currency depreciated to about 106 units against the dollar before stabilizing at the 101/2 range.
“The shilling will outperform in 2016 so my trade
would to be long shilling assets financed via the dollar. I think you
will get a double whammy - absolute returns plus a currency related
kicker,” said Mr Satchu.
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