NSE 20-share index loses 5.5pc over capital gains tax dilemma

The NSE-20 Share Index has lost 5.5 per cent since the beginning of the year over what brokers and analysts say are uncertainties surrounding the implementation of the capital gains tax (CGT).

The index stood at 4835.75 points on Wednesday compared to 5117.43 at the beginning of the year.

Market capitalisation is down 2.1 per cent at Sh2.256 trillion compared to Sh2.305 trillion at the beginning of the year, indicating investors have lost Sh48.7 billion.

In a social media comment, Dyer and Blair Investment Bank chairman Jimnah Mbaru said that investors were moving out of the Kenyan stock market to Egypt and Nigeria.

Kenya Association of Stockbrokers and Investment Banks (Kasib) said in a statement that acrimony in the stock market over CGT had contributed to the depreciation of the shilling.

Kasib noted that Egypt had recently suspended implementation of the tax for its stock market.

“Kasib continues to discourage its (CGT) implementation at the stock exchange and has recently been vindicated in this pursuit by Egypt which suspended the tax from their stock market trading,” said Kasib chief executive Willie Njoroge in a statement.

READ: KRA plans capital gains tax penalties for brokers

Mr Njoroge said brokers had proposed a transaction levy on turnover which is a more viable alternative. The taxman has ordered brokers to collect the tax despite an earlier statement by the Treasury that investors would be accountable for submitting the tax, forcing some to avoid the market.

“The vision of Kenya becoming more entrenched as an international financial services centre and a hub of regional excellence for capital markets appears under threat,” said Mr Njoroge.

Kasib, he said, was pursuing the matter through courts as it continues to engage stakeholders with a view to reaching an amicable settlement.

The turnover was higher on Wednesday due to the sale of Safaricom’s 64 million shares at between Sh15 and Sh15.6.

“Buoyed by the sale of Safaricom shares, turnover soared to Sh1.54 billion on a hefty tally of 76 million shares, up from Sh976 million on a volume of 25 million shares posted the previous day,” said the Nairobi Securities Exchange in a statement.

The banking sector had eight million shares traded, representing 10.72 per cent of the day’s traded volume.

Equity Bank was the most traded counter in the sector with 4.6 million shares changing hands at between Sh47.50 and Sh48.00.

The bank announced on Tuesday that it had entered the Democratic Republic of Congo through buying an existing lender. KCB, down one shilling to Sh59, moved 803,000 shares while Co-op Bank was unchanged at Sh22.00, having moved 2.4 million shares.