Kenya Financial Markets

2014 NSE IPO Ideas

With little activity on the Nairobi Securities Exchange in 2013 regarding the IPO Market except the listing of Home Afrika on GEMS, will the NSE match-up to its counterparts read Wallstreet and European markets that predict 2014 as the major IPO Year?  I tweeted about it over lunch to one reply so far.

 

My IPO ideas are based solely on the need to boost volatility at the bourse which has been at record highs this year.   Here are a few crazy suggestions

BROOKSIDE DIARY

The milk processing firm has been on a major buying spree targeting its competitors in the market. With plans to venture into the Nigerian market and a planned acquisition of milk processing firm in Ethiopia,  an IPO to finance these expansion activities would be timely.  The firm would make a good buy seeing that diary product consumption should rise 25% by 2025 in emerging markets alone.

COMMERCIAL BANK OF AFRICA

Since the launch of M-shwari in collaboration with Safaricom, the bank rates highly in terms of customers and this off course translates into revenue.  Listing would definitely see more liquidity on the bourse

ROYAL MEDIA SERVICES

With its stations rating highly in terms of listeners, nothing seems impossible for Royal Media.  Listing would definitely offer the firm access to capital for expansion activities which includes launching its Newspaper line and expanding to East African Markets.  As a close, they need to invest in a digital division.

SEVEN SEAS TECHNOLOGIES

With the acquisition of Access Kenya by Dimension Data, the other probable ICT Firm that could list is Seven Seas Technologies. Its got the growth to show for it, the leadership and the hunger to expand into a Pan-African company.

 

The Monetary Policy Committee Decision, 2013

 

The Monetary Policy committee has maintained the 8.5% banking base rate in yesterday’s meeting. This comes after the fear of a rise in inflation in the market after the various amendments made in the Tax Bill that saw commodity prices rise. However, the MPC maintained that the inflation rate, which is now at about 7.7%, is stable and will stay that way for a long time having seen the shilling trading at 85.51 against the dollar.

mpc desigion

The current rate, which is a downfall from the previous 9.5% at the first quarter, has caused a ripple in the market evident from the profit results by various banks in the Kenyan market. Such are KCB and Equity, which have seen a rise in net interest income profits in their H1 of 18% and 14.39%.

equity

This is due to the increased demand for loans and advances by the banks’ customers over the 9 months after 700 basis points drop in interest rates following the decision by MPC in the Q1. I focus that this will continue. However, high competition in the market may be an impediment to the increased growth in profits in Q4 through to Q1 of 2014.n this is evident from the innovative credit products that other banks have introduced such as CBA’s M-shwari, National Bank personal loans and Cooperative Bank’s Bizwise Loans.

 

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FIXED INCOME INVESTMENTS

Fixed income investments have been the driving force of the country. This is because of the debt arrangement amongst the stakeholders of this sector of the economy. This is where investors buy various instruments in anticipation of profits after some time. On the other side, there is the government which offers Bonds and treasury Bills while the private sector that are listed in the NSE( Nairobi Securities Exchange) offer ownership into their companies in the form of shares.

Therefore, the Fixed Income Investments options available in the country include;

The name Fixed Income securities comes from the nature of these investments. Fixed meaning that the return a somewhat fixed income over a period. Therefore, the interest rates are predetermined and one has to investment after evaluating if the interest rate for his investment vehicle is favorable to him.

Down to the definitions, a bond is a debt instrument where the borrower promises to repay the lender the amount borrowed after a period accompanied by interest which is spread over the period before maturity. These are the most common investment options in Kenya, mainly due to the Central Bank of Kenya taking part of this as they borrow money from the public for national development through bonds. CBK sells its bonds to Commercial Banks and other interested corporate bodies by notifying an interest in selling through advertisement in the papers.

Treasury bills are also debt instruments issued by the government and companies to raise funds for their various operations in the promise of repaying the buyers. However, bills tend to have a short maturity that may go to a maximum of 2 years.

Shares are stakes in to a company. If one buys shares in a company, you are buying ownership to that company. In the past one year, Kenyans have reaped humongous returns from shares seeing the rise of the share prices of these blue chip companies. However, if one envisions reaping well, he should be patient as this is a long-term investment instrument.

In the Money Market, commercial banks are the main participants of this market. This is where they take part in huge amounts of overnight borrowing through the interbank lending. The Central Bank of Kenya is the governing body in this trade. CBK determines the interest rate that is going to be attracted when one bank borrows from the other, this interest rate is known as the interbank rate and is arrived at due to factors such as inflation and the exposure that the banks face as per the accounts they hold in CBK

Central Bank Of Kenya

The Monetary Policy Committee which has members from CBK, the treasury department and major players in the Financial sector of the economy discuss what’s happening in the economy and the best interbank rate  to set that will take effect for a month.

Post by Francis Kamundia follow him on Twitter @kamush_

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Futures Markets on the Nairobi Securities Exchange

Futures Exchange

Soon you may be able to buy Futures Contracts, Options, Market Indices, commodities and other derivatives on the Nairobi Stock Exchange. According to the Capital Markets Authority Website, two sets of Regulations that is-the Capital Markets (Licensing Requirements for Futures Brokers and Conduct of Futures Business) Regulations, 2013 and the Capital Markets (Business of Futures Contracts) Regulations, 2013, which will facilitate the licensing of futures brokers and business of futures contracts, are already finalized. The futures exchange will adopt a strong self-regulatory organization (SRO) model providing primary supervision over the operations of the futures market with the Authority exercising a regulatory oversight role.

Let us talk Derivatives

Derivatives are contracts between two parties based on the value of the underlying assets. Futures contracts, options, market indices are examples of derivatives. I have personally traded futures. My combination consisted of a Stock Market Index .i.e. the FTSE 100, a currency i.e. USD/YEN and Gold for a commodity. Off course, one can trade these as EFTs but the liquidity and simplicity of futures cannot be underestimated. Futures need minimal capital investments as they can be leveraged. Personally, mine was an investment of 50 dollars leveraged at 1:10. So possibly, we could trade the NSE 20-share Index for indices, USD/KES for currency, 30-year treasury bonds for interest rates and possibly crude oil from Turkana. 

The idea of such an Exchange is very much welcome on the Nairobi Securities Exchange.  First because it will stabilize the prices of most commodities. Secondly, market liquidity is bound to go up as Futures promote day trading I.e. holding positions and closing them at the end of daily trading periods. Diversification of our market, currently dominated by equities, and bonds. 

Insight into Futures

Futures are contracts for future delivery of a product. They explicitly define the quantity, quality, and price per unit, date of delivery, method of delivery as well as the buyer and seller.
Futures contracts are highly leveraged. I.e. you only need a small investment (initial margin) to enter into a contract. This initial margin, usually less than 10% of the value of the contract, must be deposited in your trading account, and is adjusted daily to reflect market activity. The two parties involved are the seller (holds a short position) and the buyer (holds a long position). The two position are held as a Hedger and Speculator. The hedger owns or seeks to own the commodity while the Speculator seek to make a profit from fluctuating prices by either holding a long or short position.  If you short position, you sell at a higher price, expecting the price to fall and buy again when low while Long position buys low and sells when high. 

The introduction of this segment presents growth of our security exchange and with the plans to introduce online trading by the CDSC; the NSE is bound for take-off. 

 

 

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Market Dynamics : The FED , Nairobi Stock Exchange Relation

After my last post the Axis of Central Banks, someone asked me on Twitter how the Decisions made by the US Federal Reserve Bank has an effect on Kenyan markets yet we are thousands of miles away? The dynamics are just as interesting as it may seem. In case you didn’t know the United States Federal Reserve Bank announced just last week that they were ending the stimulus program which had seen the FED as it is popularly known buy bonds worth 85 Billion dollars a month. While that may have meant good news that the American Economy is improving, it also meant that the Quantative easing measures adopted were easily coming to a halt.  The Quantative Easing measures has seen the cost of capital hitting record lows and companies raising huge amounts in the bond market. The Equity markets had largely improved.  So when the Federal Open Market Committee (FOMC) decided to take the cut the stock market value including our own NSE went down.  My guess is as right as yours. Most investors around the world had in recent times been driven by liquidity from the main banks this is the Bank of Japan, the FED, The Bank of England and The European Central Bank all which had introduced Quantative easing hence the rapid rise in assets. This is evident in the corrections that took place in money markets after the announcements.  (Correction is the decrease in the market price of an assets or entire market after extensive price increases).  Some of the corrections at the NSE include KCB KES 36 from 42, Equity KES 31 from KES 35.75. Safaricom KES 6.70 from KES 7.30.

On the same note, the news has been awash with the drop at the NSE. My friends and I thought that the Introduction of the Capital Gains Tax was the main reason for the nervous and hands off approach. The Nairobi Stock Exchange was highly rated among the emerging and frontier markets in the world. With the FED tampering down on its stimulus program, the Dollar and interest rates are bound to rise. This therefore means that fund managers who had bought stock such as KCB and Safaricom exit the Frontier markets prompting a sell off. My thinking is based on the fact that the economy is actually doing well with inflation at low levels.  Many would dispute my analysis and am always open to ideas and corrections. The way forward is up to the government to grow the economy and keep the interest rates on government securities low.

Note the steep drop in recent years

Courtesy of Bloomberg.com

NSE 20 Share Index

Courtesy of Live.mystocks.co.ke

NSE All Share Index

Courtesy of Live.mystocks.co.ke
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Stocks: Nation Media Group

Nation Media Group is on a run.  The stock has been on an upward trend and the fundamentals show that the stock may keep rising. At close of markets yesterday, it was valued at KES 314.

The Stock Performance

The Stock Performance

Courtesy of Live.Mystocks.co.ke

The company is yet to release Q1 2013 results which I expect to be very positive. What makes this stock attractive anyway?

Digital Division Numbers

Digital Division Numbers

Courtesy of Business Daily

The Just concluded General election will boost the Q1 performance majorly due to revenue from election spending.  The firm’s broadcasting business is expected to further drive growth. The firm has a concrete expansion plan and already has a very strong market share.  The firm digital division is strong and expanding. This segment is expected to further drive growth.  The above snippet shows the Nation Media Digital division numbers which are very strong compared to the competition.  The Nation Hela International money transfer service launched in conjunction with Diamond Trust Bank is still picking traction among users. Keep it here for more on NMG!

Twitter.com/MrEricWainaina

 

 

 

NSE Equity Analysis 28th May 2013

EQUITY TURNOVER fell 40.5% as activity slowed during the day. Foreign investors accounted for 44.6% of the day’s activity, down from 50.2% in the previous session.

EABL eased 0.5%, settling at KES 377 as demand from foreign investors put a break to the downward momentum the brewer had developed. Last Week the share hit KES 425 majorly due to investor demand but oversupply of the stock saw the share fall to KES 377 yesterday.

KenolKobil edged higher earlier during the session as investors responded positively to the now split roles of managing director and chairman. The oil marketer however ended unchanged for the day at KES 10.40 as the excitement was tempered by supply at higher prices. The  Firm appointed James Mathenge its Chairman and is expected to hold its AGM on Thursday.

Access Kenya The firm reported a 20% increase in net Profit for the year ended 2012. The firm which is awaiting a 3 Billion shilling acquisition by Dimension Data has already appointed Kestrel Capital to act as the transaction advisers for the full acquisition. The shares of the firm are currently not trading awaiting the outcome of the deal. 

Standard Chartered Bank released Q1 2013 numbers to March with EPS declining 18.7% to KES 6.05. The counter was up 0.3% closing at KES 302.

GAINERS

National Bank of Kenya, Transcentury, Britam and Rea Vipingo

Losers

CIC insuarance,Sasini, East African Cables

NSE MARKET SUMMARY 27th May 2013.

EQUITY TURNOVER climbed 48.1% as activity picked up after the weekend. Foreign investors accounted for 50.2% of the day’s activity, up from 47.1% in the previous session.

Rea Vipingo announced Q1 H13 results before close of the trading session with EPS for the sisal grower falling 8.5% to KES 3.18. The stock declined 2.3% to KES 21.

National Bank commenced a rebranding over the weekend. The bank rose 1.2%. See story here {https://themarkettrends.wordpress.com/2013/05/27/national-bank-of-kenya-rebrands/}

Total Kenya and Kenol Kobil rose 2.6% and 0.5% respectively ahead of their AGM’s both scheduled for Thursday, this week.

EABL continued reversing gains, today heading 2.3% lower.

Carbacid was broadly flat during the day on thin volumes. The natural carbon dioxide maker could be one of the companies affected by new proposals by the Ministry of Mining which proposes a 10% free carried stake by a government owned National Mining Corporation. The new proposals will see the contentious 35% local ownership requirement for miners revoked.

BOND TURNOVER fell 37.2% to USD 28.8m. There were no sell-buy back transactions.

 

National Bank of Kenya Rebrands.

The National Bank of Kenya has rebranded in an effort to transform itself into one of the top banks in the country. The bank seeks to grow its turnover to 31 Billion from the current 8 Billion by 2017. The bank plans to concentrate on the Corporate and SMEs market segments to achieve this target and in line with this the bank plans to open 30 new Branches and expand its agency network to more than 2,000 agents.

To finance these expansion plans, National Bank plans a rights issue in 2014 seeking to raise 10 billion shillings.  In the Year ending 2012, the Bank posted a 53% drop in profits however, 2013 Q1 results were up 3% a dismal performance against other players in the sector. National Bank reported a decline in Net Interest Income of 4%. However with the restructuring and new management, National Bank may be up to where it belongs. At the Top.

NBK PERFORMANCE ON THE STOCK EXCHANGE

 

 

 

 

 

 

 

 

 

National Bank Shares performance on the NSE 

 

NEW LOOK nbk

National Bank has shed its former image and re-branded to using Yellow as its main color.

 

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Welcome To The Market Trends

The Market Trends is a blog that seeks to  bring about information on the financial markets in Kenya and also key issues of the Economy both Kenya and Globally. The Market Trends will work towards sifting the information and dissecting it to get the real stories behind.