Nairobi Stock Exchange – NSE: Analysis, Function and Licensed Theft
Basic knowledge before Investing or Buying Shares: What is the function of the Nairobi Stock Exchange? Which Kenyan companies are listed on NSE? What is NSE’s performance this year? Is all the NSE analysis I find online credible? Just like you, I had these questions.
Over 10 years later, my experience as a Financial Analyst in an Investment Bank has given me an insiders understanding of the Nairobi Stock Exchange (NSE) or Nairobi Securities Exchange as it is now called. I will break down the financial jargon into simple language, that even my grandma can understand, so read on…
I have on many occasions pondered the analysis and rationale behind the Nairobi Stock Exchange (NSE) and any stock exchange for that matter.
For instance, when someone buys stocks of a particular company on the stock exchange at, say Ksh 10, and then later sells them at Ksh 15, where does the Ksh 5 go or come from?
My concern is the manner in which a few persons, cloaked in black suits and plush corporate perfume, molest the market and inflate prices by moving large volumes and hence pilferage the majority of retail investors who usually pump in hard earned money.
After an IPO a company’s stock runs amok – it’s a ‘free for all’, laissez-faire market.
The book value no longer counts and, because of manipulation, stock prices are used as instruments to create ‘virtual money’ which the small men in black suits use to enrich themselves at the cost of the economy.
The men in suits siphon the hard earned money from the retail investor (often uninformed) who earns it via service and product provision – real money.
The corporate demons then inflate the stocks by a virtual figure Ksh X; add it to the real sum Ksh N they steal from the mwananchi, and finally convert the virtual money to actual money in the name of ‘trade settlement’.
Easy does it, making money from thin air – poof! I need not get into the damaging ramifications that this has at a macroeconomic level.
Nairobi Securities Exchange – Market Manipulation Analysis
Essentially, a company’s stock value/price should only increase in accordance with the company’s performance and a valuation of its books (revenue, assets, liabilities, etc).
It is such a valuation/controlling environment that is lacking in the stock market, at least Kenya’s, which has led many including my friend to shy away from the secondary market. Many shares at the exchange trade at values much higher/lower than their actual/fair value because of market manipulation.
In short, people are buying and selling shares of at non-existent values but later extrapolate real money. In a normal/free and fair’ stock market (if one exists) the market value should be = fair value of the stock and changes should only occur if changes in the fundamentals, at a technical fiscal level, have also occurred.
We’ll get back to this, but first a quick refresher course on what the stock exchange entails.
Nairobi Securities Exchange IPO (Initial Public Offering):
The Nairobi Securities Exchange is a public virtual market of companies’ shares; companies that have ‘gone public’ by means of an IPO (Initial Public Offering).
In short, it’s a market for private companies that have sold part of their ownership to the public and the price they sell their shares at is the ‘initial offering price’. A price considered the book value (or carrying value is the value of an asset according to the company’s balance sheet account balance).
After an IPO a company no longer fully owns the shares it floated and ownership resides in the hands of those who invested via the IPO.
Now back to my initial concern – where the heck does the Ksh 5 go/come from? A week ago someone told me that they only invest in the primary market (IPOs) and not the secondary market and this ignited my inquisition.
Apparently, the secondary market – stock exchange – has little controls on price and volume movement, moreover, public perception or ‘investor sentiment’ are factors that punctuate the decisions people make to buy/sell shares and subsequent pricing of these shares.
In the same way, a guy who walks into a casino has little if any control on whether or not he will strike the jackpot, but what is for sure about both scenarios is that a lot of money is pumped in.
Research and Analysis of the NSE trading systems:
You need to carry out extensive research and analysis of the NSE as well as related online trading, exchange trends, exchange performance calculations like this one from wazua, exchange rates, dividends, share prices and more.
This is probably too much for someone who just wants to make a quick investment. That’s where stock brokers come in. This article will shed some light and give an analysis of the NSE system. This may inform you to make better decisions.
But before you think of investments, let’s lay out some facts an unpack a brief history of stockbroking in Kenya. So let’s start from the beginning: How did the Nairobi Stock Exchange start?
A Brief History of Nairobi Stock Exchange (NSE) that you Should Know before you Start Trading:
The Nairobi Stock Exchange was set up in 1954. At that colonial time, African and Asians were not allowed to trade and it was a voluntary unit reserved for European stockbrokers.
It had initially in 1922 as an informal market without any governing rules or official guidelines. This ad hoc stock broking agency was a side-hustle with the rendezvous being The Stanely Hotel, a famous meeting joint located in Nairobi.
Lawyers, property agents, accountants, and others would meet up to conduct business over coffee, hot chocolate or a glass of wine.
With time its popularity and success grew, leading them to seek official recognition. This saw them reach out to the Finance Ministry in Kenya as well as London Officials at the London Stock Exchange.
The NSE 20-Share Index is a criterion used to helps track performance of NSE’s market.
In 1994, the Nairobi Stock Exchange 20-Share Index got an all-time record of 5,030 points, with a 179% return in dollars. This was recognized as the best performing market in the whole world by the IFC (International Finance Corporation).
Later that same year, the NSE success saw it moved to a bigger office at the Nation Centre Building. They also managed to digitize their operations through a computerized delivery and settlement system (DASS).
In 1996, NSE conducted it’s largest share issue by selling 26% stake of Kenya Airways. This was sold to KLM a Royal Dutch Airline, officially know as Koninklijke Luchtvaart Maatschappij N.V.
In 1998, Kenya Commercial Bank became the 1st institution to be privatized through the NSE. A 20% stake or KCB was floated to private investors.
When and why did Nairobi Stock Exchange change the name to Nairobi Securities Exchange?
In 2011, the Nairobi Stock Exchange rebranded to Nairobi Securities Exchange.
This was an effort reflecting it’s evolution into a securities exchange entity for trade, equity, settlement, debt, and the like.
- Through an Investment Manager of Financial Advisor
- Through an Online Broker
- Through a Stockbroker like AIB Capital, Dyer & Blair, or Faida Investment Bank
You also have to open a Central Deposit and Settlement account. This is a trading and securities holding account also known as a CDS account. It is used to electronically store publicly traded shares and can be opened directly via the Central Bank of Kenya or a brokerage firm.
The requirements to open this account are basically a Passport or National ID card, Three passport-sized photos, and a certified copy of a utility bill or tax return. This is Kenya and the documentation needed may reduce or increase so please confirm these details.
Once that is done, you should be ready to start buying shares. Please, not that this is a very speculative method of investment and needs lots of insight and knowledge if you are to get any returns.
Nairobi Stock Exchange App: A Review of Functionality and Features:
NSE also launched an App to Enhance Online Trading and Real Time Tracking. This app is available for users in Kenya and abroad who want real-time monitoring of their real-time
The new NSE app is said to have a Modern and state design that give users real-time stats on trades in Kenya. It is designed to meet the needs of professional brokers or just new users seeking to learn more about trading and shares.
Is the app good enough and recommended for use? Well, I personally have not used it but it has a 4.8/5 Star Review based on 30 people on the Google Play App Store. You decide if that works for you. It is available for free download on the Google Play App Store but seems not to have an iOS version yet.
The App system is powered by Nutcracker Technologies Kenya Ltd and is said to handle a large number of transactions.
The Nutcracker was first set up by Mike and Dean Casey about 18 years ago in South Africa.
NSE is cashing in on increased mobile phone use by Kenyans who now access banks on apps to settle bills, transfer cash, and shop online.
App User (Customer) Reviews: One unnamed “Google User,” said this: “Its a great app after a long period in life without seeing in real time what’s happening to our NSE. I really like it coz now I can easily access the NSE in real time thanks a lot and God bless you.”
Here’s a List of 8 Main Features on the Nairobi Securities Exchange (NSE) App:
- Certified stats directly from Nairobi Securities Exchange
- Real-time information on Equities, Bonds, and REITs
- Instant Notifications of significant changes
- Online Forum discussion board within the Nairobi Securities Exchange App
- A Virtual Game that allows you to “Play” on the NSE Simulator that is based on virtual currency
- Constant Updates on new products from the Nairobi Securities Exchange
- A customizable user profile with simplified and free sign up
- Official Exchange Rates and Currency calculator
How Many Kenyan Companies are Listed in the NSE?
Last time we checked there were 64 companies listed in the Nairobi Security Exchange.
Here is the latest list based on categories (please note that this information may not be updated):
AGRICULTURAL COMPANIES LISTED IN THE NSE
- Eaagads Ltd Ord 1.25 AIMS
- Kapchorua Tea Co. Ltd Ord Ord 5.00 AIMS
- Kakuzi Ord.5.00
- Limuru Tea Co. Ltd Ord 20.00
- Rea Vipingo Plantations Ltd Ord 5.00
- Sasini Ltd Ord 1.00
- Williamson Tea Kenya Ltd Ord 5.00
AUTOMOBILES AND ACCESSORIES COMPANIES LISTED IN THE NSE
- Car and General (K) Ltd Ord 5.00
BANKING COMPANIES LISTED IN THE NSE
- Barclays Bank Ltd Ord 0.50
- Stanbic Holdings Plc. ord.5.00
- I&M Holdings Ltd Ord 1.00
- Diamond Trust Bank Kenya Ltd Ord 4.00
- HF Group Ltd Ord 5.00
- KCB Group Ltd Ord 1.00
- National Bank of Kenya Ltd Ord 5.00
- NIC Group PLC
- Standard Chartered Bank Ltd Ord 5.00
- Equity Group Holdings Ord 0.50
- The Co-operative Bank of Kenya Ltd Ord 1.00
COMMERCIAL AND SERVICES COMPANIES LISTED IN THE NSE
- Express Ltd Ord 5.00
- Sameer Africa PLC Ord 5.00
- Kenya Airways Ltd Ord 5.00
- Nation Media Group Ord. 2.50
- Standard Group Ltd Ord 5.00
- TPS Eastern Africa (Serena) Ltd Ord 1.00
- Scangroup Ltd Ord 1.00
- Uchumi Supermarket Ltd Ord 5.00
- Longhorn Publishers Ltd
- Atlas Development and Support Services
- Deacons (East Africa) Plc Ord 2.50
- Nairobi Business Ventures Ltd
CONSTRUCTION AND ALLIED COMPANIES LISTED IN THE NSE
- Athi River Mining Ord 5.00
- Bamburi Cement Ltd Ord 5.00
- Crown Paints Kenya PLC. 0rd 5.00
- E.A.Cables Ltd Ord 0.50
- E.A.Portland Cement Ltd Ord 5.00
ENERGY AND PETROLEUM COMPANIES LISTED IN THE NSE
- KenolKobil Ltd Ord 0.05
- Total Kenya Ltd Ord 5.00
- KenGen Ltd Ord. 2.50
- Kenya Power & Lighting Co Ltd
- Umeme Ltd Ord 0.50
INSURANCE COMPANIES LISTED IN THE NSE
- Jubilee Holdings Ltd Ord 5.00
- Sanlam Kenya PLC 0rd 5.00
- Kenya Re-Insurance Corporation Ltd Ord 2.50
- Liberty Kenya Holdings Ltd
- Britam Holdings Ltd Ord 0.10
- CIC Insurance Group Ltd Ord 1.00
INVESTMENT COMPANIES LISTED IN THE NSE
- Olympia Capital Holdings ltd Ord 5.00
- Centum Investment Co Ltd Ord 0.50
- Trans-Century Ltd
- Home Afrika Ltd Ord 1.00
- Kurwitu Ventures
INVESTMENT SERVICES COMPANIES LISTED IN THE NSE
- Nairobi Securities Exchange Ltd Ord 4.00
MANUFACTURING AND ALLIED COMPANIES LISTED IN THE NSE
- B.O.C Kenya Ltd Ord 5.00
- British American Tobacco Kenya Ltd Ord 10.00
- Carbacid Investments Ltd Ord 5.00
- East African Breweries Ltd Ord 2.00
- Mumias Sugar Co. Ltd Ord 2.00
- Unga Group Ltd Ord 5.00
- Eveready East Africa Ltd Ord.1.00
- Kenya Orchards Ltd Ord 5.00
- Flame Tree Group Holdings Ltd Ord 0.825
TELECOMMUNICATION AND TECHNOLOGY COMPANIES LISTED IN THE NSE
- Safaricom PLC Ord 0.05
REAL ESTATE INVESTMENT TRUST COMPANIES LISTED IN THE NSE
- Stanlib Fahari I-REIT
EXCHANGE TRADED FUND COMPANIES LISTED IN THE NSE
- New Gold Issuer (RP) Ltd
About the writer: Robert Mũnũku
Robert Munuku (b. 1984) is an award-winning independent visual artist, writer & filmmaker from Nairobi, Kenya.
He penned a very detailed and action-packed letter, complete with recommendations to the President of Kenya, detailing what he can do to redeem Kenya from the mess we are currently in.
Munuku began visual art at an early age of 5 years old, encouraged & supported by his parents, Frank Munuku (father) & Assumpta Pierra Munuku (mother).
Later in his early 20’s Munuku learned digital art and fused the techniques with his previous preferred media (wood, paints, pencils, ink, etc.). In his mid-twenties, he learned how to use DSLR cameras and began self-teaching photography & cinematography until he got his first camera years later.
Munuku is also the Founder of Mau Mau Arts (began in 2014) which is an organization that seeks to create a strong network of independent visual artists, filmmakers & performing artists on the continent with the shared goal of independence and art-driven, community-based creative education.Robert Munuku (b. 1984) is an award-winning independent visual artist, writer & filmmaker from Nairobi, Kenya. Click To Tweet
Named after one of the groups who fought for Kenya’s independence, Mau Mau Arts believes that art is a powerful tool that can address social issues plaguing the country, such as corruption and poverty amongst others. Through workshops, street exhibitions and exchange programs, Mau Mau will connect creative artists with one another, building a network that hopefully expands in years to come.
After a while, Munuku felt he needed to pursue his real passion (art, creative writing & film) and therefore went ahead to form Mau Mau Arts as a way to unite creative individuals after seeking out ways to fill voids that were left gaping in the industry.
He later transitioned into film work with his first project being as a Producer of the short film Heartshot for the 2015 48 Hour Film Festival Nairobi and later Kaleidoscope (2016), a fantasy short film, where he worked as an Executive Producer, Screenwriter & Producer. From 2017, Munuku embarked on multiple projects some of which include documentary making, music & feature film production.
Watch Robert Mũnũku’s Demo Showreel (2015-2018):