A stock broker’s agent at the Nairobi Stock Exchange. Prospects of the British American IPO and TransCentury offer has diminished investor interest in existing stocks. File
The twin listings of British American Insurance and TransCentury have taken a toll on existing shares in the stock market as investors take positions for the new offers, plunging market valuation to record lows.
All three market indices have dropped below 20-month lows, signalling the anticipation among investors hoping to reap from the new listings that reek of overnight wealth.
This means most counters at the Nairobi Stock Exchange are still likely to plunge further as the offer window for the respective offers remains open for the first initial public offering since 2008.
Samuel Wachira, head of sales at Kestrel Capital said that all indicators in the market were pointing to an even lower valuation as investors sought new opportunities in the two firms.
“We are slowly seeing the market wake up to the reality that there are new offers with most sales coming from the retail investors,” said Mr Wachira, adding “The indices will plunge further while the new shares remain on offer”.
He supposed that bigger individual and institutional investors were also likely to sell some part of their existing portfolios to buy into the new offers.
Since Monday this week, the NSE-20 share index which tracks blue-chip stocks shed 3.2per cent to 3746 points- figures last recorded in February last year, with almost all the counters posting losses.
Though the market has largely maintained a steady decline since the start of the year, the last seven trading sessions have particularly recorded the sharpest drops, influenced by massive sale orders.
Investment analysts contend that the retail investors are the more likely to place big bets on the new offers, especially as they hunt for investment opportunities that could help them recoup losses on their portfolios.
Edward Munyi, the head of trade at Suntra Investment Bank says that the new listings are likely to attract huge interest considering the three-year drought of new offers at the NSE since shares of the Co-operative Bank started trading in 2008.
“Retail investors may not be seeking to take long term positions with these two issues and will mostly invest in them for the prospects of price jumps,” said Mr Munyi.
In 2006, investors in the power generation firm Kengen, and Equity Bank made huge gains on the respective days that their shares were listed at the NSE, a fact that may be influencing the investment decisions most retail buyers are making.
TransCentury, which has invested heavily in infrastructure, manufacturing and transport, had its shares join the market Thursday, trading at Sh57 in the early trade to move 1.14 million shares, with market players noting strong interest from international investors.
Some price volatility will be expected in the near term as shares struggle on the path of price discovery, with the tentative share price prior to the listing placed at Sh50.
Shares of British American Investments Company are on offer with the window expected to close on August 5, priced at nine shillings a share.
Analysts project that the British American IPO would achieve full subscription because of the low pricing and interest received just yet, with Mr Munyi saying that institutional investors tended to express their interest in the last minutes.
