International Finance

Poor market performance hits Kenya’s stock brokerages

The market capitalisation of companies listed on the Kenyan bourse declined by 16.65 percent year on year in Q4 2018

The poor performance of Kenya’s stock market has hit Kenyan stock brokerages, most of which are now owned by banks. The market capitalisation of companies listed on the Kenyan bourse declined by 16.65 percent, with the total market value reaching KSh 2,102.02 billion in the last quarter of 2018 compared from 2,521.77 billion in the last quarter of the previous year. Analysts have pointed out that the drop in stock value is because of foreign investors leaving a number of blue-chips in the country coupled with persistent domestic issues.  

A few years ago banks actively sought acquisition of stock brokerage firms in Kenya. For example, ABC bank acquired 86 percent stake in Crossfield Securities and Equity Bank acquired trading licence from Juanco Investment Bank. Also, the citizens had keen interest to open Central Depository and Settlement accounts and invest in stocks. Now Kenya’s stock market has lost the charm it once had and Kenyan stock brokerages are a burden for banks that acquired them in the recent past. 

 Last month, the top blue-chip stocks Kenya Power and Kengen were also trading at a value lower than their IPO price. The overall drop in stock value has negatively impacted investors’ wealth, resulting in a declining market capitalisation of $22 billion from $26 billion in 2017. 

With that, Kenya’s Co-operative Bank is skeptical about its stockbroking business. The bank in its 2018 annual report said that its stock brokerage subsidiary is not sustainable and there is only a slim chance for the unit to turnaround. However the banks might not cease their stock brokerage units’ operations overnight because they have invested enough over the years to see profits, an independent analyst, Daniel Kuyob, told a media house. The closure of these units will imply a wrong message as banks are the prominent players in the stock market. 

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