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THE NAIROBI STOCK EXCHANGE Presentation to the National Defence College

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1951 First stock broking firm commenced -Francis Drummond ... 2000 NSE appointed the National Numbering Agency (NNA) for Kenya. ... – PowerPoint PPT presentation

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Title: THE NAIROBI STOCK EXCHANGE Presentation to the National Defence College


1
THE NAIROBI STOCK EXCHANGEPresentation to the
National Defence College
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

2
TABLE OF CONTENTS
  • NSE Vision and Mission
  • Market Structure
  • Market Performance Overview
  • Absorptive Capacity
  • Automation of the NSE Trading System
  • Corporate Actions for 2007

3
NSE Mission and Vision
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

4
NSE 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.

5
NSE CORPORATE CORE VALUES

6
NSE Brief History
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

7
NSE - 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
8
NSE - 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.
9
NSE - 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.

10
Market Structure
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

11
LISTINGS
  • Products listed on the Nairobi Stock Exchange
  • 52 equities
  • 5 corporate bonds
  • 75 Government of Kenya Treasury Bonds

12
THE 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)

13
Market Performance Overview
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

14
EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. (Dec. 2002 Dec. 2006)

15
EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. 31 Dec. 2002 to 29 Dec. 2006
16
Market Indicators Full Year 2005 and upto 12
months ending December 29 2006

17
Market Performance2 January 2007 - 30 March 2007
  • Market Indicators

18
1st 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.

20
1st Quarter 2007 Performance Overview
  • Market Indicators Corresponding Quarter 2006

21
EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. (31 Dec. 2002 15 May 2007)

22
EQUITY MARKET PERFORMANCE NSE 20 Share Index
Mkt. Cap. 31 Dec. 2002 to 15 May 2007
23
Market Absorptive Capacity
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

24
Market Absorptive Capacity
25
Issue 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.

26
Transactions in the Pipeline
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

27
Transactions 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

28
Progress Report on Automated Trading at the NSE
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

29
AUTOMATION
  • 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.

30
AUTOMATION
  • 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.

31
Challenges
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

32
Challenges
  • 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.

33
Future Plans
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007

34
Product 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.

35
Changing 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.

36
End
  • Donald Ouma
  • Manager Research Policy Analysis
  • May 18 2007
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