Kenyans investors balk at shrinking stock prices

Source: Xinhua| 2019-06-25 18:49:13|Editor: xuxin
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NAIROBI, June 25 (Xinhua) -- The Kenyan bourse is attracting a small number of local investors as potential ones keep off due to shrinking stock prices.

The market has lost the sparkle of yesteryears when Kenyans would flock to stock brokerage firms to open Central Depository and Settlement (CDS) accounts and invest in stocks.

The East African nation's citizens mainly invested in stocks of homegrown firms that include Safaricom, Kenya Power, Kengen, Kenya Airways and Mumias Sugar.

A majority of the stocks are currently trading below the initial public offer price save for a few like Safaricom, Kenya's leading telecom, Equity Bank and Kenya Commercial Bank (KCB).

The worst hit sectors include insurance, where Britam on Monday traded at a low of 8 shillings (0.08 U.S. dollars), Corporate Insurance Company (CIC) 0.03 dollars and Liberty 0.1 dollars.

Kenya Power and Kengen in the energy sector, initially the best blue-chip stocks at the stock market, are trading at lower than the initial public offer price.

The former traded at 0.04 dollars and the latter 0.06 dollars on Monday, the price they have stayed put since the start of the year.

Kenya Airways in the transport sector and Mumias Sugar in manufacturing are the other worst performing stocks as the companies continue to chalk up losses. On Monday, the stocks traded at 0.03 dollars and 0.003 dollars respectively.

Some of the best performing stocks include Safaricom, which traded on Monday at 0.27 dollars, over five times the IPO price, while Equity Bank and KCB traded at 0.39 dollars.

The general decline in prices of stocks has affected investors' wealth, with market capitalization standing at 22 billion dollars on Monday, down from 26 billion dollars two years ago.

Similarly, the NSE 20 Share Index, which measures the performance of blue-chip stocks stood at 2,639.22 on Monday, a decline from over 3,000 dollars last year.

Latest data from the Capital Markets Authority showed on Tuesday that the number of CDS accounts opened by locals in 2018 stood at 14,442 from a peak of 31,739 in 2015.

Fred Ajwang, a computer technician in Nairobi, who was initially enthusiastic about the stock market, said Tuesday, he cannot invest at the market due to low returns.

"My father introduced me to the stock market in 2007 by offering to buy me 100 Kengen shares that were on initial offer. I later bought myself three other stocks but I am yet to make any money from most of the shares," said Ajwang.

Ajwang, as many other small Kenyan investors, has, however, invested at the debt market, last month buying into part of the 2.5 million dollars mobile bond dubbed M-Akiba floated by the National Treasury.

One only needs 30 dollars to invest into the risk-free bond, making it appeal to many small investors, with the bond recording 30,232 new registrations, according to Rose Mambo, the chief executive of CDS Corporation.

Ernest Manuyo, a business management lecturer at Pioneer Institute, attributed apathy of local investors towards the stock market to several factors, among them declining stock prices, reduced disposable income, lack of returns from previous investments and rising cost of living.