The equity market, which was once considered a passport to instant riches by many potential, and particularly small and retail investors, appears to be slowly losing its luster with signs that the exchange is in dire need of urgent repair.
So strong was the appeal of the stock market that a few stockbrokers chose to run it as closed shop, thanks to the process of demutualisation that seeks to open up the market to the public.
Indeed stock markets are critical to the growth of economies and their role in resource mobilisation cannot be underestimated.
They have created employment opportunities and bailed out businesses in need of capital.
Globally, stock markets have helped turn trading nations into empires, created a multibillion-dollar savings industry and fuelled the growth of 21st-century titans such as Google. But with trade volumes thinning and revenues shrinking at the Nairobi Securities Exchange (NSE) all indications are that things are no longer rosy and it may not be business as usual.
It is certainly shocking to hear that the total profit reported by all market intermediaries (fund managers, investment banks, collective investments schemes, investment advisors, and stockbrokers) for the year ending June 2011 stood at Sh753 million compared to Sh89.5 billion made by banks in a similar period.
This actually shows how small the capital markets subsector is in the entire financial sector and thereby calls for more innovative products to deepen the market.
The subdued activities at the bourse have impacted negatively on trading volumes and brokerage commissions thereby squeezing total revenues for market intermediaries.
Consequently, market intermediaries have been left jostling over limited corporate finance contracts whereby they have even ended up defying ethical business practices while undercutting each other through heft returnable commissions.
Some players try to cash in on advisory/consultancy fees, fund management fees, interest and dividend incomes just to survive the tide of financial hemorrhage sweeping through the equity market.
Stakeholders contend that over the last five years the market has stagnated in terms of growth while implementation of a number of ambitious projects meant to deepen the market has faltered.
The number of initial public offerings (IPOs) has plummeted and now the role of the stock market in mobilising resources for investment is coming under sharp focus.
