Kestrel Capital and Renaissance Capital tightened their grip on the equities market last year as foreign trading desks continued calling the shots in a bearish bourse.
Kestrel ended the year with a 20.9 per cent market share, up from 16 per cent in 2015 while Rencap grew its share to 16.7 per cent from 13.6 per cent.
The top six market intermediaries accounted for 79 per cent of the Sh294.4 billion trade — reported as a turnover of Sh147.2 billion in actual cash changing hands — whereas in 2015 they had accounted for 76.5 per cent of traded volumes.
Smaller stockbrokers, who do not enjoy the access to the foreign trades, paid the price as foreign investors accounted for 67 per cent of total trading.
The industry is, however, bracing for lower earnings given the sharp decline in overall traded turnover compared to 2015, when it stood at Sh418.8 billion.
This has raised the prospects of job cuts in the sector as the intermediaries fight to cut costs.
“Unfortunately, it has been a suffering market that has helped our market share. With trading volumes much lower than prior years, many brokers have reduced their marketing activities. So while our market share has increased, our overall net revenue and profits have declined,” said Kestrel Capital chief executive Andre DeSimone.
“Whether by attrition or otherwise, there has already been and will continue to be downsizing in the industry, despite the new entrants in the market. Brokers will keep nursing losses and poor returns in hopes of a market revival after the elections.”
SBG Securities, Equity Investment Bank (EIB), Standard Investment Bank and African Alliance rounded off the top six, which comprised the same players from the previous year.
SBG had a market share of 13.8 per cent, which was a decline from the 14.9 per cent in 2015, while EIB saw its share decline to 12.7 per cent last year from 13.8 per cent. SIB maintained its market share at 8.3 per cent, while African Alliance saw its share fall to 6.6 per cent from 9.8 per cent.
Among the other intermediaries, there was a significant gain in market share for Apex Africa, from 0.9 per cent in 2015 to 2.3 per cent last year. Genghis Capital, which was taken over in August by Pamoja Capital from fallen Chase Bank, saw its share shrink to 1.5 per cent from 4.7 per cent in 2015.
The bulk of earnings by stockbrokers come from equities trading commissions of between 1.5 and 2.1 per cent per trade, although many of the larger deals are discounted lower.