Bourse turnover decline extends to third quarter

Turnover at the Nairobi Securities Exchange (NSE) fell in three consecutive quarters of the year as the main indices also dipped, fresh data shows.

Standard Investment Bank (SIB) showed the turnover stood at Sh30.6 billion in the third quarter of the year compared to previous Sh33.3 billion, an 8.1 per cent downward change.

In the first quarter of the year the turnover was higher at Sh46.6 billion, meaning the market had shaved off Sh16 billion turnover by the end of quarter three.

The dip in turnover came against a fall in the NSE 20-Share Index by 201.35 points or 7.6 per cent compared to the second quarter of the year and 14.6 per cent compared to the performance at the end of the first quarter.

The NSE All-Share Index (NASI) declined by 4.15 points or 2.8 per cent in the third quarter to stand at 145.46 points compared to the second one and 12.2 points fall or 7.8 per cent compared to the first quarter when it stood at 157.66 points.

A major reason for the decline in the equities trading has emanated from the shift to the fixed-income securities, mostly those floated by the Treasury in its drive to raise money to finance the annual Budget.

“Local fund managers have contributed to the declining fortunes of the equities market at the NSE. They have been going into the fixed-income securities in a big way,” said Susan Makena, research analyst with Sterling Investment Bank.

“Market prices have gone down and since people bought at higher prices they are reluctant to sell. They can’t make a profit so they are going into the fixed-income where they are assured of a return over a given period. So they are looking at minimising possible losses by keeping off the equities market.”

Huge amounts have entered the market in the form of Treasury bills and bonds between July and last week. For T-bonds, which constitute the largest portion of government securities, the outstanding amount stood at Sh1.843 trillion as at September 20, an increase of Sh94.5 billion compared to the level at the end of June. Banks hold the largest amount of the securities followed by pension funds and parastatals.