Capital Markets

CMA urges State to sell shares to jump-start trading

cma

Capital Markets Authority regulatory and policy director Luke Ombara. PHOTO | SALATON NJAU | NMG

BDgeneric_logo

Summary

  • The Capital Markets Authority (CMA) wants the government to sell additional shares in listed State firms to help improve the trading liquidity of the Nairobi Securities Exchange.
  • Trading activity at the stock market has slowed down due to lower share prices following the onset of the Covid-19 pandemic, which dragged down market turnover ratio to 1.56 per cent in the third quarter this year.

The Capital Markets Authority (CMA) wants the government to sell additional shares in listed State firms to help improve the trading liquidity of the Nairobi Securities Exchange.

Trading activity at the stock market has slowed down due to lower share prices following the onset of the Covid-19 pandemic, which dragged down market turnover ratio to 1.56 per cent in the third quarter this year.

The regulator has been pushing for listing of state-owned enterprises through IPOs as a long-term strategy to revive the market, but has now changed tack favouring a short-term fix to the problem of reduced activity.

CMA director of policy and regulation Luke Ombara said the Treasury should float some of its shareholding to raise money while stimulating the market.

“We are proposing additional divesting of existing companies, for instance Safaricom where if the government were to offload another 10 per cent, it could raise a lot of money,” Mr Ombara said.

The government owns stakes in 12 publicly listed companies, including Safaricom (35 per cent), Kenya Reinsurance (60 per cent), Kenya Airways (48.9 percent) and Kenya Power (50 per cent).

Others are East African Portland Cement, where the Treasury holds 25.3 percent and NSSF (27 percent), Uchumi (14.67 percent), Mumias Sugar (20 percent) HF Group (2.41 percent) and Liberty Kenya (0.86 percent).

The government also holds a stake of 19.76 per cent in KCB and 1.1 per cent of Stanbic Bank.

Mr Ombara said they would also continue to push for new listings with an eye on profitable companies like Kenya Pipeline and Kenya Ports Authority.

Over the years, privatisation of state corporations has been key in stimulating the market with Initial Public Offers (IPO) being oversubscribed.

Since the NSE itself listed through an IPO five years ago there has been relatively low activity in getting new stocks into the market, save for small firms coming in through introduction.

On the contrary the bourse has seen several exits including National Bank that was acquired by KCB, KenolKobil which was bought out by Rubis.