Saccos, investment clubs pull billions out of treasury paper
An investors at the Nairobi Securities Exchange. Savings and credit societies, investment clubs and individuals have sharply reduced their holdings of bonds since the beginning of the year by Sh63.6 billion, as banks and pensions funds stepped up packing cash at the Treasury. PHOTO | FILE
What you need to know:
At the beginning of the year, the saccos and individuals held Sh122.7 billion worth of investments in the fixed-income securities, but by the end of last week they had just Sh59.1 billion worth. This represented a 51.8 per cent fall in the value of the bond portfolio.
Data from CBK shows banks and pension funds — seeking to hedge against a volatile bear market — upped their stakes in the bonds market with the amounts rising by 14.5 and 15.6 per cent, respectively, in the past eight months.
Investors are likely selling bonds and buying equities as their prices fall, and may also be going into real estate to exploit the opportunities available there.
Savings and credit societies, investment clubs and individuals have sharply reduced their holdings of bonds since the beginning of the year by Sh63.6 billion, as banks and pensions funds stepped up packing cash at the Treasury.
At the beginning of the year, the saccos and individuals held Sh122.7 billion worth of investments in the fixed-income securities, but by the end of last week they had just Sh59.1 billion worth. This represented a 51.8 per cent fall in the value of the bond portfolio.
Data from the Central Bank of Kenya (CBK) shows banks and pension funds — seeking to hedge against a volatile bear market — upped their stakes in the bonds market with the amounts rising by 14.5 and 15.6 per cent, respectively, in the past eight months.
Banks ramped up their holdings by Sh102.1 billion to total Sh808 billion at the end of last week. Pension funds, which must invest some of their cash in fixed-income instruments by law, held Sh359.1 billion by last week, which was Sh48.4 billion more compared to the beginning of the year.
“Among many investors, the fixed-income side is where money is and so they are buying more. But it is possible that some of the individuals and investment clubs are selling bonds and buying equities as their prices fall,” said Vimal Parmar, head of research at Nairobi-based financial advisory firm Burbidge Capital.
Mr Parmar said the investors may also be going into real estate to exploit the opportunities available there. Several saccos have been going big in real estate with some frequently advertising to sell houses or parcels of land.
From the CBK data, the largest percentage increase in holdings of government securities are the parastatals. The State-owned firms have Sh52.1 billion compared to Sh36.6 billion at the beginning of the year — indicating that they have risen Sh15.6 billion in eight months.
Banks have been taking advantage of their huge cash pile to deepen stake in the fixed-income market since the start of the year. Bonds at the primary market are currently giving high returns due to the rising interest rates.
The other factor in banks’ participation in the fixed-income markets has to do with the fact that they count towards the liquidity requirement as stipulated by law.
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