On June 20, 2013, a normal trading day at the Nairobi Securities Exchange (NSE), Kenya Commercial Bank (KCB), the county’s largest bank by asset base, sold a total of 4,250,000 ordinary shares.
On the same day, Equity Bank, the county’s largest bank in terms of customer accounts, sold a total of 3,211,900 shares. Barclays and the Cooperative Bank, the other heavy hitters on the local banking scene, sold 237,500 and 678,000 respectively.
How come two of these banks sold more than 3,200,000 shares each on that day while the other two, together, sold less than one million?
Corresponding shares
Was it because of the par value of these shares which, incidentally, is the same for Barclays and Equity at only Sh0.50 and likewise for KCB and Cooperative (Co-operative Bank ) Bank at only Sh1.00? Unlikely.
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Three months later, on September 17, the corresponding shares traded at the NSE were as follows: KCB, 2,522,900; Equity, 3,536,800; Co-operative Bank, 373,000; and Barclays, 135,300. Taking only these two days as reference points, KCB fell by about 1,7 million shares, Co-op Bank by 0.3 million, Barclays by 0.1 million. Equity rose by just over 0.3 million.
In terms of share prices, KCB rose from Sh38.75 to 44.75; Equity fell from 33.75 to 33.50; Co-operative Bank rose marginally from 15.85 to 16.00 while Barclays moved from 16.70 to 17.00.
Why do certain companies consistently sell more shares at constant or rising prices on the NSE than others? Why do those who wish to invest on the NSE opt to buy the shares of certain companies and avoid others?
Let us take a few other dates within this three-month window to try understand the inner dynamics of these NSE share movements. On July 19, at an average price of Sh42 per share, KCB moved a total of 994,100 shares, compared to Equity Bank’s 1,017,000 shares at an average price of Sh33.50.
That day, Barclays traded only 170,800 shares at 17.55 while Co-operative Bank moved 340,100 shares at 16.20. On July 4, 2013, KCB moved 919,300 shares at 37.50 while Equity traded 4,259,600 at 31.50. On that day, Co-operative Bank moved more than 5.1 million at 15.50, while Barclays traded 658,000 at 15.80.
Exactly two months later, on September 4, Barclays managed only 171,200 shares at 17.10 while Co-operative Bank had fallen to 350,700 at 15.95. On that day, Equity traded 3,604,900 shares at 34.25 while KCB managed only 462,200 at 43.00.
A week later, on September 10, the trade volume between these four main banks was more evenly shared out, with KCB leading the pack at 462,200; Equity at 272,500; Co-operative Bank at 231,300 and Barclays at 112,800.
The picture reflected on September 12 was slightly different from that of two days earlier. KCB and Equity again came tops at 1,960,500 and 1,333,700 respectively while Co-operative Bank and Barclays followed with 366,600 and 150,800 respectively.
Comparisons
Of all the sample dates considered over this three-month period, only on July 12 did all of the four major banks trade more than one million shares each. On that day, KCB and Equity traded 2,444,000 and 1,358,100 respectively, while Barclays moved 1,038,300. Co-operative Bank unusually led the pack, moving over 4 million shares.
If we compare the average share prices of the two main banks, KCB and Equity, over the year ending September 18, 2013, we note that even though KCB rose highest to Sh46, it also fell furthest to 24.75. Equity, on the other hand, while rising to a high of only 36.50, also fell to only 21.00.
This means that for an ordinary investor on the NSE, it was a much more risky venture investing in KCB shares than it was investing in Equity shares over the year ending on September 18, 2013. The movement of shares on an open securities market like the NSE does not say everything about the different quoted companies, but it says a great deal.
A reasonably consistent, non-fluctuating or steadily rising share price sends the message that the market has confidence in that company’s fundamentals and is openly inviting those with extra funds to invest in that particular company. Also, a steadily rising price or that with a smaller fluctuating range sends a clearer message of both stability and solidity than a price range that swings much more widely and wildly.
The writer is a lecturer and consultant in Nairobi.
