Market analysis

February 22, 2009

, NAIROBI, Kenya, Feb 22 – The market continued to slide southward despite the positive results and increased dividends announced by Barclays bank and East African Breweries Limited during the week and this development has prompted the Ministry of Finance to begin looking into ways to revamp the credibility of the market and the regulators in the investing public’s eye with an announcement by the minister on the government’s plans to reconstitute the board of directors of the CMA, the NSE and the CDSC.

It is however not clear how the government will be able to reconstitute the board of the NSE which is a private company and therefore not under the mandate of the Ministry. The recalling of the NSSF board may be a good turn for the market as turnover has suffered a major blow since the fund withdrew from its action at the market. The fund holds a portfolio of Sh44.5 billion which has been inactive since the Minister for Labour disbanded the board. The fund is however not expected to begin trading until audits of some of the brokerages that carry out orders on its behalf have been audited.
The week saw very low turnover at the beginning but increased foreign buying boosted turnover towards the end of the week.

Announcements: Barclays announced profit before tax increase of 13 percent at Sh8.016 billion with an increase in income of 25 percent over the period NIC Bank posted their end year results showing 41.3 percent increase in profit before tax and 39.15 percent in profit after tax. The Bank’s earnings were boosted by a 65.1 percent increase in fees and commissions and 49.03 percent increase in income from interest earned from customer deposits the bank also reported an impressive increase in foreign exchange income of 86.61 percent. The bank announced a final dividend of 0.25 shillings adding to the interim dividend of a similar amount paid out in October 2008. The board also announced one bonus share for every 10 held subject to shareholders’ approval.

Outlook: The week ahead is full of uncertainty as the market reaction to results has bafflingly been negative to say the least and this has completely negated all expectations of our analysts that the market would begin to show signs of recovery as results come in. All eyes are now on the debt market as the success of the first Bond Public Offer of the government infrastructure bond closed on the 18th of Feb and if it was fully subscribed that may well be the confirmation that 2009 will indeed be a year of debt.

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