Stock market investors lose Sh147 billion in year of storm

Brokers trade on the floor of the Nairobi Securities Exchange. PHOTO | FILE 

By CHARLES MWANIKI

In Summary

• The NSE has more than 1.2 million local retail investors, holding 26 per cent of the 89 billion issued shares.
• By close of trading Thursday, the market’s capitalisation — the valuation of all issued shares at the prevailing prices — had dropped to Sh1.901 trillion having opened the year at Sh2.05 trillion.
• Aly-Khan Satchu, an independent market analyst, said the banking sector had been a major drag on the indices, a trend he expects to deepen as more merger and acquisitions take place. 
• The 11 listed banks collectively shed Sh182 billion to stand at Sh494 billion.

Stock market investors lost a whopping Sh147 billion this year as a prolonged bear run hit most counters, making 2016 the second year of pain at the Nairobi bourse.

The Nairobi Securities Exchange (NSE) was Thursday headed to closing this year’s trading at a five-year low, a trend that has meant that any retail investor exiting today must take a sizeable loss on his or her investment.

Those unwilling to cut their losses have to live with the reality of having their capital tied up for a while because a market rally is not expected in the next eight months of electioneering.

The NSE has more than 1.2 million local retail investors, holding 26 per cent of the 89 billion issued shares.

By close of trading Thursday, the market’s capitalisation — the valuation of all issued shares at the prevailing prices — had dropped to Sh1.901 trillion having opened the year at Sh2.05 trillion.

This is the second year that the market has suffered erosion. In 2015, investors were Sh250.5 billion in the red, meaning the bourse has shed a total of Sh398 billion investor wealth in the past two years.

READ: Year to forget for top NSE investors as their wealth shrinks by Sh13.8b

The NSE 20 share index lost 22 per cent this year, while the All share index was down 9.9 per cent. Turnover, which measures the volume of trade at the bourse, shrunk this year to about Sh146 billion compared to Sh209 billion in 2015, setting up market intermediaries for lower earnings from brokerage commissions.

Aly-Khan Satchu, an independent market analyst, said the banking sector had been a major drag on the indices, a trend he expects to deepen as more mergers and acquisitions take place. 

“It has not been a good year for equities with some notable exceptions like Safaricom, Kenya Airways and KenolKobil. Investors need to be nimble stock-pickers through 2017 to stay ahead of the curve,” he said.

The 11 listed banks collectively shed Sh182 billion to stand at Sh494 billion.

Standard Chartered was the best performing bank stock having shed 3.1 per cent its value a year to date to close at Sh189, while National Bank of Kenya, which shed 54 per cent to close at Sh7.20, was the worst performer.

High net investors

The market slide has also affected high net worth investors, whose portfolios shed billions of shillings during the year.

Equity Bank founder Peter Munga and the bank’s chief executive, James Mwangi — who also have shares in insurance firm Britam — lost Sh1.4 billion and Sh2.3 billion respectively to the bear market.

The value of ScanGroup chief executive Bharat Thakrar’s 51.8 million shares in the communications firm dropped from Sh1.55 billion at the beginning of the year to Sh984 million after the stock lost nearly half its value to close Thursday’s trading at Sh19.

Chris Kirubi , who owns nearly 30 per cent of investment firm Centum,  Baloobhai Patel,  Pradeep Paunrana (ARM), Kibunga Kimani (Kakuzi), Leah Muguku and Simon Thuo (Equity Bank) also booked paper losses ranging from Sh200 million to Sh2 billion this year.

Market analysts, however, said that while they expect the market to remain depressed going into 2017, the worst of the slide may have passed. 

Market valuations were Thursday approaching what analysts call the bottom of the trough because a number of counters were trading at near all-time lows.

“Notwithstanding increased political risk (and it is worth noting a general sub-Saharan Africa trend, which has eroded the incumbency advantage) valuations are now close to rock-bottom. It is difficult to see prices falling much further,” said Mr Satchu.

The NSE is currently trading at a price to earnings ratio of 10.5 times, versus a historical average of 13.6, with a dividend yield of 6.7 per cent versus a historical average of 3.6 per cent.

Positive return

Just eight out of the 65 listed companies in the market have given shareholders a positive return this year and only KenolKobil (up 48 per cent) and Safaricom (up 17 per cent) made a double digit percentage share price gain. Also in the black were BAT Kenya, Eaagads, Kenya Airways, Longhorn, Jubilee Holdings and Kenya Re.

Safaricom is deemed to have made significant gains given that the telecoms operator has the largest number of retail shareholders at the bourse. This means it has provided some measure of solace to suffering investors who have been hit in other counters.

The Safaricom gain has also padded the market’s overall capitalisation to the tune of Sh110 billion, meaning the overall decline would have been much worse.

READ: Safaricom share hits high of Sh20.25 as investors seek to book dividend gain

The biggest percentage decline in the market this year has come from troubled retailer Uchumi Supermarkets, down 67 per cent from Sh10.95 to close at Sh3.65 a share.

Agriculture firm Kapchorua Tea’s share shed 60 per cent of its value, having dropped from Sh200 to Sh80, although it incorporated a price correction on account of bonus shares issued in January.

Fashion retailer Deacons East Africa, which listed in August at Sh15 a share, shed 59 per cent of its value in the five months of trading to close at Sh6.10.

READ: Why Deacons took step to list on NSE after four-year wait