Top three NSE stockbrokers grab over 50pc of equity market

The top three stockbrokers trading at the Nairobi Securities Exchange (NSE) now control over 50 per cent of the market, using strong foreign trading desks to lock out smaller rivals who rely on fast-declining local retail trades.

Kestrel Capital, Renaissance Capital (Rencap) and Equity Investment Bank (EIB) traded a combined Sh74.7 billion worth of shares at the NSE in the first six months of the year, while the rest of the intermediaries handled Sh72.6 billion.

The combined market share of the three stood at 50.7 per cent compared to 44.3 per cent in June last year.

Last month Kestrel Capital grew its market share to 20.1 per cent from 16.6 per cent a year earlier, followed by Rencap whose pie grew to 16.7 per cent from 11.9 per cent, while EIB’s share fell from 15.8 per cent to 13.9 per cent—having been boosted last year by mega trades involving the exit of Helios Partners from the Equity Bank stock.

Kestrel Capital, traditionally known to have a big foreign trading desk, however attributed its growth in market share to a difficult environment for small brokers.

“Our growth in market share is not attributable to more foreign trading.  I believe the slower trading environment has made business more difficult for smaller brokers.  Hence, the larger stronger brokers like Kestrel Capital have taken more market share.  That said, competition amongst the top brokers has become more intense, fighting each other in a rather stagnant market,” said Andre DeSimone, CEO of Kestrel Capital.

The three stockbrokers, alongside CfC Stanbic subsidiary SBG Securities that had a market share of 12.2 per cent, enjoy the biggest slice of foreign trading deals at the bourse. No other stockbroker has a share exceeding 10 per cent.

In the first half of the year, foreign investors accounted for 66 per cent of all trades at the bourse, with analysts saying that local institutional investors have been shying away from the market due to lower returns compared to other investments such as government securities, real estate and the money markets.

“Local high networth investors and fund managers started the year holding on to liquid cash positions anticipating that high interest rates would continue, adopting a wait-and-see attitude in the markets,” said Sterling Capital analyst Eric Munywoki.

READ: Brokers’ foreign trading desks beat stock market barons

The bourse has generally been on the decline this year, with the NSE 20 share index 12 per cent down year to date to 3555 points (July 19) and the equities traded 31 per cent down at Sh147.3 billion (counting both buys and sells) compared to Sh213.1 billion over a similar period last year.

This has seen 16 out of the 19 actively trading market intermediaries record lower trading volumes this year compared to June 2015, including those whose market share has gone up.

Only CBA Capital, Old Mutual Securities and Apex Africa recorded a higher trading turnover compared to June 2015.

Although stockbrokers have not yet released their half-year results the lower turnover and reduced frequency of trading by retail investors point towards lower profits for the period.

NSE data shows that the number of trades fell by 31 per cent to 158,790 in the six months to June, from 232,212 the same period last year.