Stockbrokers make a killing as NSE turnover skyrockets
Investment brokers on the trading floor of the Nairobi Securities Exchange. PHOTO | SALATON NJAU
What you need to know:
Stockbrokers will see a huge boost in brokerage commissions, derived from customer transaction volumes at a rate of between 1.5 and 2.1 per cent a trade.
Equity turnover at the Nairobi Securities Exchange (NSE) for the first 10 months of the year has surpassed 2013 full-year totals by Sh14 billion, with five large brokerages chalking up a record year of commissions.
Turnover for the end of October stood at Sh169.8 billion compared to the full 2013 total of Sh155.78 billion. In the first 10 months of 2013, turnover was Sh131.29 billion. Stockbrokers will see a huge boost in brokerage commissions, derived from customer transaction volumes at a rate of between 1.5 and 2.1 per cent a trade.
“We have seen increased local participation this year supported further by new listings like NSE and Flame Tree entering the market at retail attractive prices of Sh9 and Sh8 respectively,” said Genghis Capital analyst Silha Rasugu.
“Local funds have also increased equity allocations temporarily as bond yields on the short-term treasuries declined making hold-to-maturity fixed income investments less attractive.”
Return on the shorter-term government debt has largely held below 11 per cent this year. Following the latest auctions, the interest rates for the 91-day, 182-day and 364-day Treasury Bills stood at 8.85 per cent, 9.18 per cent and 10.24 per cent respectively.
The rise in demand for equities is seen as one of the factors driving the equity market bull run that saw the bourse touch a high of 5400 points in the third quarter of the year.
According to Mr Rasugu, with short-term gains in share price, especially as we approach year end, profit taking was inevitable. On the foreign side, sell-offs have accelerated due to the weakening currency with investors keen on limiting forex losses on trades.
The NSE data shows that cumulatively to October, top five stockbrokers — Kestrel Capital, SBG Securities, Renaissance Capital, Standard Investment Bank and African Alliance — accounted for two thirds (65 per cent) of the total traded volume.
In gross buys and sells, Kestrel leads with 16.6 per cent of the turnover at Sh56.44 billion, of which Sh29.44 billion was on purchases and Sh27 billion in sales for the 10 months.
SBG is second at 14.93 per cent with buy transactions worth Sh25.36 and sales worth Sh25.34 billion, ahead of Rencap’s 14.8 per cent which transacted buys of Sh26.11 billion and sales worth Sh24.19 billion.
In calculating the equity turnover of the market, the NSE considers only one side of a transaction, in order to give an accurate figure of the money changing hands in real terms.
In bonds trading, cumulative turnover to end of October this year was Sh412.5 billion. In a similar period in 2013, the turnover stood at Sh401.45 billion.
New system The average monthly bond turnover this year is Sh41.25 billion, compared to the 2013 monthly turnover for the whole year of Sh37.7 billion. Going by this average, the whole year turnover for 2014 looks likely to surpass the Sh452.45 billion recorded for the whole of 2013.
It is unlikely, however, to match the Sh565.67 billion turnover of 2012.
Bonds turnover is expected to receive a boost, however, going forward due to changes introduced to allow same-day settlement and the launch of a new bond system that allows online trading of debt securities.
“In the fixed Income market, we have not really felt the impact of OTC trading on volumes just yet, but we expect this to pick up in 2015 as traders adapt to the new system,” said Mr Rasugu.
