Battered brokers offload stake in Nairobi bourse shareholding

Dealers at the Nairobi Securities Exchange. A review of NSE Plc’s financial performance shows that the firm’s net profit dropped to $800,000 in 2019 from $3.2 million in 2014. PHOTO | FILE | NMG 

In Summary

• Out of the 17 brokerage firms that controlled close to 56 per cent of the exchange after the
  initial public offering six years ago (July 2014), eight firms have sold off their shareholding.

By JAMES ANYANZWA
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The self-listed Nairobi Securities Exchange (NSE) is battling a crisis of confidence over the continuous decline in stock prices, which has seen close to a half of the stockbrokerage firms that held shares in the Kenyan bourse sell their stake over falling returns and uncertainties over the market’s recovery prospects.

The EastAfrican has learnt that out of the 17 brokerage firms that controlled close to 56 per cent of the exchange after the initial public offering six years ago (July 2014), eight firms have sold off their shareholding while others such as NIC Securities Ltd and Dyer &Blair Investment Bank have reduced their stakes.

Latest data from the Capital Markets Authority (CMA) shows that by February foreign investors controlled 52.62 per cent of the exchange while local individual and institutional investors held 12.39 per cent and 34.9 per cent of the shares respectively. Of the shares held by local institutional investors 21.27 per cent belong to the remaining nine stockbrokerage firms, the National Treasury (3.37 per cent) and CMA Investor Compensation Fund (3.37 per cent).

The stockbrokers who have given up ownership of the exchange include Faida Investment Bank, African Alliance Investment Bank Kenya Ltd, Suntra Investment Bank, Francis Thuo & Partners Ltd, Kestrel Capital Ltd, Ngenye Kariuki and Company Ltd, SGB securities and Shah Munge & Partners Ltd , according to NSE’s latest annual report.

Stockbrokers face a depressed market, prompting some to diversify their business away from the equity market while others such as AIB Capital and Apex Africa Capital Ltd have entered into agreements to merge their businesses.

A review of NSE Plc’s financial performance shows that the firm’s net profit dropped to Ksh80 million ($800,000) in 2019 from Ksh320 million ($3.2 million) in 2014, while shareholder dividends declined to Ksh0.08 ($0.0008) per share compared with Ksh2 ($0.02) per share in 2013 — the last year before the exchange opened its ownership to the public. Its stock price fell to as low as Ksh7.54 ($0.075) per share by June 23 compared with the IPO price of Ksh9.50 ($0.095), translating to losses of Ksh2 ($0.02) per share for investors who bought into the offer in July 2014. During the first day of trading the IPO NSE share price jumped to a high of Ksh16 ($0.16) per share.

According to NSE’s annual report, the firm’s performance has been hampered by poor performance of listed firms, lack of interest in new investment products and its over-reliance on trading income (75 per cent).

Overall, foreign investors control over 60 per cent of the activities at NSE and during the three months to March this year they sold off shares amounting to Ksh11.18 billion ($111.8 million) largely due to panic trading over Covid-19.