Traders on the floor of the Nairobi Securities Exchange. PHOTO | FILE
By KABONA ESIARA
In Summary
Analysts project the region’s capital markets will remain weak due to depressed economies.
Trading data from Kenya’s Capital Markets Authority shows that
the Nairobi Securities Exchange (NSE) equity market turnover dropped to
Ksh140 billion ($1.36 billion) between January and November 2016, from
Ksh194.2 billion ($1.89 billion) last year.
The drop in turnover is partly blamed on reducing investor
confidence in the Kenya capital markets following the failure of
Imperial Bank, Chase Bank and Dubai Bank.
It is estimated that Ksh6.8 billion ($66.14 million) in debts and interest on bonds was locked in the banks.
The policy decision to cap lending rates to 4 per cent above the
Kenya Banks’ Reference Rate has also reduced investor’s appetite for
financial and investments sector listed companies’ earnings.
“The equity markets were depressed during the year and it is
projected that this will decline further due to generally depressed
economy as manifested in profit warnings announced by a number of
blue-chip companies,” an analysis by experts at CMA Kenya point out.
The analysis further points out that: “This was exacerbated by
the dip in investor confidence in the capital markets due to the failure
of Imperial Bank, Chase Bank and Dubai Bank, with significant funds
raised from retail and institutional investors from Corporate Bond
issues by Imperial Bank and Chase Bank locked in, together with
investments in Unit Trusts.”
Rwanda
The Rwanda Stock Exchange (RSE) turnover also dropped by 17.3
per cent between January and November, to $40.8 million, from $49.3
million in 2015.
“The equities markets have been hit in the past two years
everywhere not only in Rwanda. Globally things are not that good either
as the spillovers from the commodity crunch and dollar hardening against
the local currencies is at work at least for the short to medium term,”
said CEO of the RSE, Celestin Rwabukumba.
But the expected I&M Bank initial public offer (IPO), in the
first quarter of 2017 in which the Rwandan government is floating its
19 per cent stake is set to create momentum on the RSE.
“We are only waiting for the end of year audited financial
results of I&M bank to be included in the prospectus,” a deal maker
closely following listing said.
Dar bourse
In Tanzania, the expected listing of telcos on Dar es Salaam
Stock Exchange is expected to rally investors seeking a stake in some of
the profitable companies in the country.
Electronic and communications companies registered in Tanzania
are required by law to float their shares to the public and subsequently
list on the DSE. So far two, Tigo Tanzania a subsidiary of Swedish
telecoms and media group Millicom International Cellular is reported to
have sought permission from Capital Markets and Securities Authority.
Vodacom Tanzania, part of South Africa’s Vodacom Group is also
in advanced stages to list ahead of the December 25 deadline for all
telcos to list at least 25 per cent of the shares.
Like most regional bourses, the DSE index dropped marginally by
0.19 per cent to 2,477.24, from 2,481.99, while the NSE All Share Index
dipped by 2.70 per cent from 140.6 in the first six months of 2016.
To rally more investor confidence on the NSE, the CMA is
recommending faster implementation of turnaround strategies by listed
firms and issuers of securities to the public, particularly in the area
of corporate governance.
Analysts are calling for a swift and decisive enforcement action for non-compliance with market practices.
The combination of new listings, continuous investor education
plus market diversification could prop up the markets from dipping
further, CMA analysis suggests
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