Mobile trading apps is the way to go

Former British prime minister Margaret Thatcher is probably one of the most enduring political figures of the last century.

The “Iron Lady”, as she was commonly called, is best remembered for her role in the fall of the Berlin Wall and the Falklands War. For corporate Britain, the late Baroness Thatcher is best remembered for her privatisation programme which aspired to turn Britain into a nation of private shareholders.

Her vision was simple; make ownership of shares as common as cars. However, a generation later, this vision has not come to fruition.

According to a report by think-tank Republica, UK individual share ownership has halved since the 1980s; and only 11 per cent of the total value of shares is now owned by individuals.

Share ownership has not reached the level of car ownership of 1985, let alone today – 76 per cent of UK households own a car or a van, whereas only 19 per cent of adults own shares.

So why did this noble idea fail?

Well, there are several reasons but the main has to be poor execution. In an attempt to ensure heavy investor demand and a first day premium so that the government could claim its Initial Public Offers (IPOs) as successful, it priced shares cheaply.

This unfortunate move encouraged a short termism mentality. Once the gravy train crashed in the 1987 bear market, most investors lost a taste for equities.

Now, this story sounds familiar.

Remember the heady days of 2006 through to first-half of 2008 at the NSE? Recall the low IPO prices, hefty premiums, 4 times over-subscription, new accounts, quick exits et cetera? Once the tide turned in 2008, retail investor holdings dropped by half (to 15 per cent). Same script, different cast. Fast forward to 2017 and the individual investor is back in full action. In the last nine years, total individual shareholding has swung back to pre-2008 levels (to 25 per cent).

Now, here comes the question; is Thatcher’s dream possible? Can Kenya become a shareholding nation? Is it possible to have individual shareholding reach at least half the levels of mobile phone ownership? I believe so, if we can harness the power of mobile technology. Technology has been applied in various ways - automation of trading and settlement, live trading data and online share trading.

Mobile trading is the sweet spot. In as much as reliability, design and security issues have held down some of the mobile trading apps in the market, it’s still the way to go.

Some 90 per cent of Kenyans own a mobile phone out of which 44 per cent have Internet-ready capabilities. 75 per cent of the middle class Kenyans are shopping online via their mobile phones.

The generation X and Y group is ready to be roped in. We need to see them buying stocks the same way they’re taking selfies.

Another way to broaden the shareholder base is having a small shareholders association of the 1.7 million private shareholders in the country.

The association can help in the re-education of the retail investor to help them understand that investing is not a “make a quick profit” operation. Long term investing should be emphasised.

No doubt, widening ownership is great idea. Ownership gives the freedom that comes with the control that ownership affords.

In a democracy, there can be few greater causes than this. Besides, Kenya can learn from Japan’s example. Despite its economic challenges, the country boasts the widest shareholder ownership across its population.

Its proportion of the population owning shares (now at 31 per cent) has doubled since 1980.