Kenya capital markets smaller in a rebased economy
Kenya attractiveness in the global capital markets has been ruffled after the value of stocks in leading companies declined to 25 per cent from 27 per cent of the GDP of the country’s economy upon rebasing.
Share prices in Kenya’s stock market failed to keep up with the increase in the country’s Gross Domestic Product (GDP) after rebasing to Kes10.7 trillion.
The value of stocks market stood at Kes2.7 trillion as at September and the Capital Markets Authority (CMA) is worried if the Nairobi Securities Exchange does not attract new listings, Kenya will slip down in its global position.
Kenya is one of the leading capital markets in Africa besides, Nigeria, South Africa, Egypt and Morrocco.
However, the market has experienced an Initial Public Offering (IPO) drought instead losing several firms in recent past including, National Bank of Kenya; Deacons, ARM Cement, Mumias Sugar, KenolKobil and Kenya Airways.
“Before the rebasing, market capitalization to GDP stood at 27.09 per cent. The ratio has fallen now to approximately 25.84 per cent after rebasing,” CMA said during the release of the 2021 quarter three market soundness report.
“This may affect performance targets and Kenya’s global rankings if there is no growth in new listings,” the markets watchdog noted.
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Kenya rebased its economy for 2019 which increased the size of the GDP to Kes10.2 trillion up from Kes9.7 trillion.
The 5 per cent jump is lower that when Kenya last rebased its economy in 2014 which saw GDP edge up 25.4 per cent to Kes4.3 trillion from Kes3.6 trillion.
This is the seventh time Kenya’s economy will be undergoing the exercise, with previous ones in 1957, 1967, 1976, 1985, 2005, and 2014.
While the economy has grown in terms of the value of transportation activities which in the new series was found to be higher by 2.8 points to 10.8 per cent, the service sector took a hit especially from the pandemic fallout.
Share prices hit record lows on foreign investor sale as they sought safer assets and a decline in company profits also had a drag on the market capitalization.
The market has been very silent with the only corporate activity being a share buyback by Nation Media Group and capital raising by Crown Paints.
Crown Paint’s right issue sought to raise Kes711.8 million by issuing and listing 71.1 million new ordinary shares on the NSE.
The rights registered an oversubscription by 13.74 per cent in terms of the bids received and raised Kes809.5 million.
Nation Media Group’s share buyback of up to 10 per cent of its issued and paid-up share capital saw it acquire 17.1 million ordinary shares (representing 8.25 per cent of the total issued share capital), leaving 190,295,163 ordinary shares as the ordinary shares available for trading at the NSE.
