Nairobi Stock Exchange Market Report at the EASEA Consultative meeting in Nairobi 10th August 2005

1
Nairobi Stock Exchange Market Reportat the EASEA
Consultative meeting in Nairobi 10th August 2005

• By
• Mr. Chris Mwebesa
• Chief Executive

2
TABLE OF CONTENTS

• Stock Market Key Performance Indicators
• Market Capitalization and NSE 20-Share Index
• Interest Rates on 91-Day Treasury Bill
• Equity Monthly Turnover 2003 vs 2004
• Bond Monthly Turnover 2003 vs 2004
• Month on Month Inflation comparison and NSE 20
  Share Index Dec 2003 Sept 2004
• Structure of Government Debt
• Average Monthly 91 Day Treasury Bill Interest
  Rates Sept 2003 Feb 2005
• New Listings

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Stock Market Key Performance Indicators
4
Market Performance Bull Market
5
Average Monthly Interest Rates Feb 2004 July
2005
6
Equity Monthly Turnover Comparisons for 2003,
2004 and 2005
7
Bond Monthly Turnover from 2003 to 2005
8
2005 vs 2004 Market Performance

9
Structure of Government Debt
10
Six months market performance overview- The
bullish market in 2005
Best stock in terms of share price appreciation
between 1st Jan. to 8th July 2005
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Trend NSE 20 Share Index Market capitalization

• Since Sept 30 2002,
• the NSE 20 Share Index has moved from 1043.73 to
  3,987.04
• on July 22, 2005, a rise of 2, 943.31
  points, 282.00 change.
• the market capitalization has moved from Ksh.
  85.79 billion to
• Ksh. 433.10 billion on July 15, 2005,
  posting an increase of
• Ksh. 347.31 billion, 404.84 change.
• Note Though the share prices of some index
  linked counters have fallen, market
  capitalization and NSE 20 share Index have risen
  for the six months (Jan Jun 2005) by 30.84 and
  28.37 respectively. What we are witnessing is
  simply a normal market correction as speculators
  take profits.

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Reasons for the Bullish Equity Market.

• Improved Economic prospects Agriculture,
  Tourism, Transport and
• Telecommunication sectors.
• Real GDP is forecast to increase from a growth
  rate of 4.3 in 2004 to 4.8 in 2005 and 5.1 in
  2006
• Economic activity strongest in the key export
  sectors of horticulture, tea, textiles and
  tourism
• Modest growth in the manufacturing and
  telecommunications sectors also underpinned
  overall GDP growth Industrials continue to be
  the heaviest traded.

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Reasons for the Bullish Equity Market.

• Improved corporate earnings
• Introduction of Central Depository System ( CDS)
  boosted
• liquidity

14
Outlook for Economy
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Threats-

• Inflation could trigger off contractionary
  monetary policy
• If the Government has to resort to the domestic
  markets for extra funds than anticipated to
  finance its deficit, this coupled with strong
  demand for credit from the private sector could
  cause interest rates to rise higher and faster
• Wage escalation and an appreciating shilling
  would reduce Kenyas export competitiveness and
  make her a more expensive tourism destination

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Threats (Contd)-

• The garment export sector (EPZ) after 4 years of
  consecutive growth, is now under threat following
  the end of the Multi Fibre Arrangement in Jan
  2005, which has exposed Kenyan producers to low
  cost Asian producers, particularly China. The
  industry is expected to continue to suffer from
  the high cost operating environment and the poor
  state of the physical infrastructure
• Growth could hit electricity generation
  constraints
• Ugandas politics could unravel, a big hit on
  Kenyan exports.

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Opportunities-

• Kenyan goods continue to exhibit strong export
  performance there is potential for further growth
  into the COMESA region and Southern Sudan
• Coffee industry reforms could notch up growth by
  upto 1 per annum in 2006 7
• Large infrastructure projects in
  telecommunications, transport and electricity
  maybe finally taking off, boosting all economic
  sectors of the economy, if these materialise,
  real GDP growth can exceed 5.1 in 2006

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Economic Forecast-

• We forecast that the economy will achieve and
  likely exceed the projected growth rate of 4.8
  for 2005
• This should be reflected in improved corporate
  earnings

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Outlook for the Market-

• Barring any major economic shocks we should
  expect continued improvements in market
  performance and activity.
• Market has began to position itself in
  anticipation of corporate earnings announcements
• Activity in the secondary bond market should pick
  up in the second half of 2005 if interest rates
  remain stable

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Policy Tax Incentives
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Policy and Tax Incentives

• As an incentive to encourage more listings at the
  NSE, the Minister proposed that newly listed
  companies pay corporation tax at a lower rate of
  20, for a period of 5 years, provided these
  companies offer at least 40 of their shares to
  the Kenyan public (2005)
• New and expanded share capital by listed
  companies or those seeking listing exempt from
  stamp duty (2000/2001)

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Policy and Tax Incentives

• Companies that apply and are listed shall get a
  tax amnesty on their past omitted income,
  provided they make a full disclosure of their
  assets and liabilities and undertake to pay all
  their future due taxes (2001)
• Expenses incurred by companies in having their
  financial instruments rated by an independent
  rating agency are tax deductible (1997/98)
• Exemption of stamp duty and value added tax on
  the transfer of listed securities (1995)
• Costs of IPOs were made tax deductible (1995)

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New Listings
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New Listings

• New Prospects for Listing include
• The Main Investment Market Segment (MIMS)
• Equity Commercial Bank
• Uchumi Supermarkets Rights Issue (Kshs. 1.2
  billion)
• 30 Government stake in Kenya Electricity
  Generating Company (KENGEN)

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New Listings-cont.

• New Prospects for Listing include
• The Fixed Income Securities Market Segment
  (FISMS)
• Faulu Kenya Ltd- Listed 5 year floating rate note
  of Kshs 500 million on 4 April 2005
• PTA Bank Ltd Listed 7 year floating rate note
  of Kshs 800 million on 4 July 2005
• Athi River Mining 5 year floating rate note of
  Kshs. 600.00 million bond awaiting CMA approval
• EADB second tranche of Kshs. 700.00 million bond
• Celtel medium term note awaiting CMA approval

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• Thank you