14 August 2017

Kenya: Risk-Averse Kenyans Stay Away From NSE

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The number of Kenyans entering the equities market is set to fall for the fourth year in a row.

Data from the Capital Markets Authority shows that 7,728 share trading accounts were opened in the six months to June, down from 10,492 in the same period last year and 15,972 in 2015.

Over the past three years, the securities market record valuation has dropped as prices of different counters dipped due to corporate announcements such as profit declines.

In 2015, the indicative NSE 20 Share Index declined by 21 per cent, before a further shrinkage of two per cent last year.

This year the 20 share index is up 21.7 per cent to date, which is largely attributable to investors buying at bargain prices.

Kenyans seem to prefer investing in more predictable money markets -- Treasury bills and bonds -- rather than the volatile equities market.

Collective investment schemes show that 77.6 per cent of investors prefer the money market fund whose return is guaranteed, and 11.8 per cent choose the risky equity fund.

Collective investment schemes allow investors to pool their finances under professional experts who invest the money on their behalf.

When putting money in the pool, an investor selects how their cash will be invested depending on their risk appetite.

The balanced fund, which means an investor wants some money put in government securities and the rest in equities, has 6.9 per cent of the Ksh55.7 billion ($557 million) invested in collective schemes.

Regional insurer CIC controls the largest share of collective schemes, at 24.2 per cent, followed by other regional insurers Britam at 18.7 per cent and Old Mutual at 14.4 per cent.

Notably, only Ksh24.3 million ($243,000) or 0.04 per cent of the assets managed by the schemes was invested in an East African fund. The East African fund allows the fund managers to bargain hunt across the region.

In the year to date, regional markets have posted mixed results with Uganda having its all share index up 15.7 per cent while Rwanda is down 2.2 per cent and Tanzania 2.4 per cent.

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