Title: THE NAIROBI STOCK EXCHANGE Presentation to the National Defence College
1THE NAIROBI STOCK EXCHANGEPresentation to the
National Defence College
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
2TABLE OF CONTENTS
- NSE Vision and Mission
- Market Structure
- Market Performance Overview
- Absorptive Capacity
- Automation of the NSE Trading System
- Corporate Actions for 2007
3NSE Mission and Vision
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
4NSE VISION and MISSION
- VISION a picture of our desired future
- To be a leading Securities Exchange in the
world. - MISSION a rallying point for the Board and
Management - To provide a world class trading facility for
wealth creation.
5NSE CORPORATE CORE VALUES
6NSE Brief History
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
7NSE - Brief History
1920s Dealing in shares and stocks commenced
but on a gentlemans agreement. No formal
market, rules and regulations to govern stock
market activities - (Informal) 1951
First stock broking firm commenced -Francis
Drummond 1954 NSE constituted as a voluntary
Association of Stock Brokers - (Formal) 1984
IFC/CBK Study, Development of Money and
Capital Markets culminated in the formation of
a regulatory body, Capital Markets Authority
(CMA) In 1989 1988 First privatization on NSE-
sale of 30 Government stake in Kenya Commercial
Bank
8NSE - Brief History
1991- NSE registered under the Companies Act
(Cap 486), phased out" Call Over Trading System
in favour of the floor based Open Outcry
System 1996- Kenya Airways privatization. The
Privatization team awarded the World Bank Award
for Excellence for 1996 for being a model
success story in the divestiture of state-owned
enterprises. 2000 NSE appointed the National
Numbering Agency (NNA) for Kenya. 2004 Kenya
Airways becomes the first listed company to
cross list on the three East Africa Securities
exchanges.
9NSE - Brief History
- 2004 First phase of NSE automation launched-
CDS, automating the settlement of equity trades
executed on the NSE, coincided with the NSE
Golden Jubilee. - Benefits
- Reduces mutilation, theft or loss of share
certificates - Reduction in transaction cost due to immediate
transfer of shares pursuant to trades - Reduces handling of large volume of paper work
- Shares held safely hence reducing doubts about
fraud and fake certificates thus building
confidence in the market - Minimizes bad/wrong deliveries.
10Market Structure
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
11LISTINGS
- Products listed on the Nairobi Stock Exchange
- 52 equities
- 5 corporate bonds
- 75 Government of Kenya Treasury Bonds
12THE MARKET SEGMENTS
- The Main Board
- The Main Investment Market Segment (MIMS) 44
companies - The Alternative Investment Market Segment (AIMS)
8 companies - The Fixed Income Securities Market Segment
(FISMS)
13Market Performance Overview
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
14EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. (Dec. 2002 Dec. 2006)
15EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. 31 Dec. 2002 to 29 Dec. 2006
16Market Indicators Full Year 2005 and upto 12
months ending December 29 2006
17Market Performance2 January 2007 - 30 March 2007
181st Quarter 2007 Performance Overview
- Market Indicators Changes from the Previous
Quarter
19- In the first quarter of 2007, the market
underwent a correction. As of May 15 2007, the
NSE 20 Share index is down 8.44 since the end of
2006 (a record-breaking year in all respects). - This can be attributed to a variety of factors-
- The January effect and the first quarter
seasonality of reduced trading activity, which is
caused by investors selling liquid assets to
cover the obligations of the new-year - Speculators taking profits and exiting the
market - Value investors sitting on the sidelines, waiting
to pick up equities at more reasonable
valuations - 2006 IPOs brought in a slew of new investors who
have never experienced a correction and due to
lack of proper education some could be panic
selling.
201st Quarter 2007 Performance Overview
- Market Indicators Corresponding Quarter 2006
21EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. (31 Dec. 2002 15 May 2007)
22EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. 31 Dec. 2002 to 15 May 2007
23Market Absorptive Capacity
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
24Market Absorptive Capacity
25Issue of the 15 Year Treasury Bond
- The Government of Kenya issued and listed the
first 15 year treasury bond on the Nairobi Stock
Exchange - The bond with a coupon of 14.5 was priced at
14.9. - The bond attracted 460 bids worth Kshs. 6.9
billion.
26Transactions in the Pipeline
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
27Transactions in the Pipeline
- Privatisation transactions in the pipeline
include the sale to the public and subsequent
listing of Government stakes in the following- - 40 of Kenya Re-insurance Corporation
- 25 of Safaricom Ltd.
- An undetermined stake of Telkom Kenya offloaded
through the NSE after 51 has been sold to a
strategic investor on September 25 2007 - From the private sector-
- On June 4 2007, Access Kenya will be the first
locally owned ISP to list on the NSE
28Progress Report on Automated Trading at the NSE
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
29AUTOMATION
- The implementation of the Automated Trading
System happened on Monday 11 September 2006 - The ATS is sourced from Millennium Information
Technologies (MIT) of Colombo, Sri Lanka, who are
also the suppliers of the Central Depository
System (CDS). MIT have also supplied similar
solutions to the Colombo Stock Exchange and the
Stock Exchange of Mauritius - The NSE trading hours have increased from 2 to 3
hours (1000 am 100 pm). Besides trading
equities, the ATS is also fully capable of
trading immobilised corporate bonds and treasury
bonds - 43.82 of the value of 2006 equity turnover took
place after the automation.
30AUTOMATION
- The daily NSE trading session will begin from
0900 am and end at 1200 Noon to coincide with
the launch of the International News Television
Network CNBC African Channel on June 1 2007 - CNBC Africa will provide daily coverage of the
Kenyan, South African and Nigerian Capital
Markets from Bureaux in Sandton, Nairobi, Abuja,
and Lagos. - Further bureaux in Africa will be established on
a roll out basis.
31Challenges
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
32Challenges
- Product Offering
- Increasing the number of issues from the private
sector - Introducing new products onto the Exchange
- Diversifying our revenue streams
- Becoming more effective as a Self Regulatory
Organisation (SRO) - NSE has a huge public profile and visibility
which can turn negative. We really are the first
line regulator and where there are issues bigger
than the NSE then the CMA must take up its
mandate.
33Future Plans
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007
34Product Offering
- Encouraging private sector issuers to raise
capital - Facilitating regional IPOs simultaneous raising
of capital on NSE, DSE and USE - Asset backed securities and infrastructure bonds
- Exchange traded funds
- Real Estate Investment Trusts
- Cross listing of the blue chip firms already
listed on the NSE, DSE and the USE - Kenya Airways, East African Breweries and Jubilee
Holdings Ltd are currently cross listed on all
the 3 securities exchanges - Leveraging on our upgraded website and ATS to
offer data vending services - Develop a market for medium sized firms
- Progressive review of the regulatory environment.
35Changing the Corporate Structure
- Becoming more effective as a Self Regulatory
Organisation (SRO) and being able to raise
capital from the market - The NSE wishes to demutualise in 2008
- The Exchange will become a limited liability
company with share capital - The right to access the trading floor of the
exchange will be separated from ownership of the
exchange improving corporate governance
structures at the NSE - The NSE has also signed a MoU with the Uganda
Securities Exchange will the ultimate intention
of proceeding with a merger of the two exchanges
to create a regional exchange with trading floors
in Kampala and Nairobi.
36End
- Donald Ouma
- Manager Research Policy Analysis
- May 18 2007