Capital Markets

Daily NSE trading turnover up 31pc in first half of year

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Stock brokers at Nairobi Securities Exchange. FILE PHOTO | NMG

The average daily traded turnover at the Nairobi Securities Exchange (NSE) #ticker:NSE rose by 31 per cent to Sh868 million in the six months to June compared to a similar period in 2017, setting up stockbrokers and their agents for higher commission earnings.

The Standard Investment Bank (SIB) analysis of NSE data shows the daily traded average hit its peak in March at Sh1.1 billion, coinciding with the peak of a three-month rally that saw the NSE 20 Share Index touch a 2018 high of 3,862 points on March 21.

Investors pay the intermediaries a commission of up to 2.1 per cent per trade at the bourse — part of which is shared with the Central Depository & Settlement Corporation, the NSE and the Capital Markets Authority — meaning that higher traded volumes like those seen this year will automatically boost the top-line income of stockbrokers and investment banks.

Analysts say the higher trading activity is reflective of improved investor sentiment, which saw volumes remain relatively high even as the market went through a blip in the second quarter of the year.

“It is a result of improved political stability after the election period, coupled with a bullish trend experienced in the banking sector (in the first quarter) and investors taking positions on counters that declared profits for dividend income,” said analysts at Cytonn Investments in a market review of the first half of the year.

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Part of the enhanced trading has also come from profit-taking by foreign investors though, especially in the second quarter of the year when they took out a net of Sh8.2 billion from the market.

The effect on the higher trading numbers will be seen when stockbrokers release their half-year results in coming weeks, with expectations of higher profitability if they have managed to keep a lid on costs.

The market intermediaries made a combined net profit of Sh36.14 million in 2017 compared to a total net loss of Sh30.32 million the previous year, riding on a fairly bullish year to turn around their fortunes.

They had also shed staff and reduced office space last year to cut costs in the wake of the losses made in 2016.

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