State's share sale plan major boon for retail investors

The plan by the government to divest six companies listed at the Nairobi Securities Exchange (NSE) is an opportunity for retail investors to acquire shares from some of these companies, now trading at bargain prices.

Retail investors are individuals or non-professional investors, who buy and sell securities through brokerage firms. Their absence from the market has adversely impacted trading volumes and reduced revenues for the self-listed bourse and for stock brokerage firms that rely heavily on transaction incomes.

It has also left trading in the hands of institutional investors—who mostly buy shares for long-term returns—and foreign investors who are highly sensitive to the economic and political environment of the country.

Holdings or retail investors at the NSE, according to available data, surged to 8.75 per cent as of September 2023. In contrast, the retail investors held 1.85 per cent of the equity at the end of September 2020.

With the latest technology platforms installed at the NSE, including the Dosikaa mobile app, retail investors can now purchase these shares directly from their phones, without going through the stock brokers or investment banks.

The Dosikaa app aims to increase retail participation. It is supported by key sector players, including regulator Capital Markets Authority (CMA), NSE, Central Depository and Settlement Corporation (CDSC), Kenya Association of Stock Brokers and Investment Banks (Kasib), various Stock Brokers and Synergy Systems Ltd.

Dosikaa allows retailers to trade securities listed at the NSE and keep track of their investments with world-class portfolio tracking tools. Get instant access to comprehensive market data, historical data, and company financials spanning over 16 years.

Dosikaa App also gives the user instant access to Kenya’s most comprehensive online financial database and world-class professional pre-trade decision support and post-trade analysis tools.

Following cabinet approval, the government intends to divest or reduce its shareholding from Liberty Insurance, Housing Finance Company, East African Portland Cement, Eveready Plc, Nairobi Securities Exchange and Stanbic Bank Kenya.

The government owns a 3.36 per cent shareholding in NSE, 2.41 per cent in HF Group, 1.1 per cent in Stanbic Holdings, 0.9 per cent in Liberty Kenya Holdings and 17.2 per cent in Eveready, with total shares estimated to be more than Sh24 billion

Retail investors could also keep an eye on government plans to offload shares in other State-owned companies through the bourse.

These firms include Kenya Pipeline Company, New Kenya Cooperative Creameries, Kenyatta International Convention Centre (KICC), National Oil Corporation, Kenya Seed Company, The Kenya Literature Bureau (KLB), Mwea Rice Mills, Western Kenya Rice Mills, Numerical Machining Complex, Vehicle Manufacturers Limited (KVM), and Rivatex East Africa.

Available figures indicate that retail investors’ participation in the bourse remains low, with domestic and international institutional investors currently the dominant forces.

According to CMA Director of Policy and Market Deepening Luke Ombara, there is a need to raise investment in the domestic market as the success of the bourse relies heavily on broad participation across classes of investors.

The planned government divestiture process comes as the Central Bank of Kenya puts into gear its plans to introduce a new bonds platform for “hustlers” (ordinary Kenyans).

The latest CMA quarter two 2024 report says the Central Bank of Kenya (CBK) is set to establish a new bond system to attract small retail investors to increase access to Treasury securities.

It has solicited offers for consulting services for the pre- and post-implementation examination of the intended platform known as the “hustler bond system.”

 It has set aside funds in its budget toward the cost of Request For Proposals (RFPs) for the provision of consultancy services for hustler bond post-implementation review.

The establishment of the hustler bond system comes in the context of the government’s drive for a lower entry level for ordinary investors in Treasury bills and bonds.

Treasury bonds, including infrastructure bonds, have a minimum investment requirement of Sh50,000. Treasury bills, which mostly differ from bonds in their shorter term, need a minimum of Sh100,000.

The introduction of the “hustler bond system” by the CBK to lower the entry barrier for retail investors into Treasury securities is expected to enhance market growth and stability by broadening investor participation and increasing demand for Government bonds and bills.