NAIROBI, Kenya, Mar 24 – Tough times that have rocked the money market in 2015 have seen the Nairobi Securities Exchange (NSE) lower its net earnings by 4.5 percent in the year to record Sh305 million down from Sh320 million in 2014.
The Nairobi bourse has attributed the drop to a reduction in turnover in the equity and bonds market.
Before tax, the firm lowered its earnings by 13.6 percent to Sh381 million from Sh441.8 million recorded in 2014.
The firm’s to total income reduced to Sh808 million compared to Sh821.9 million recorded in 2014 while administrative costs increased to Sh448 million up from Sh389 million over the same period in 2014.
“During the year, the NSE invested seed capital of Sh20 million, Sh100 million and Sh10 million towards the NSE Clear Limited, the NSE Derivatives Settlement Guarantee Fund and the NSE Derivatives Investor Protection Fund respectively,” the firm stated.
Total assets increased by 13.8 percent from Sh1.6 billion in 2014 to Sh1.9 billion in 2015 as a result of increased profitability.
The bearish market saw 2015 ending on a low tone on equities as investment options, since declining prices made up most part of the year.
During the year, the Kenya equities market performed poorly with the NSE All Share Index and NSE 20 shedding 10.6 percent and 21 percent respectively, as a result of declines in large cap stocks, while the NSE 25 lost 2.2 percent since inception during the year.
The decline was attributed to slowdown growth in China and the uncertainty over the US Federal Reserve rate hike which led to foreign investors exiting the market.
2015 saw the highest number of listed companies issue profit warnings, with 15 firms notifying investors of expected significant drop in earnings, by at least 25 percent, compared to 11 in 2014.
This points to a challenging operating environment during the year 2015, which was characterised by higher interest rates and a weak shilling.
Going forward the Exchange is on course to launch the derivatives market this year. This market will provide Kenyans with financial instruments that will enable them hedge their currency and investment risks.
Moreover, the NSE has plans to launch Exchange Traded Funds (ETFs) which will target investors seeking investments in low volatile and cost effective opportunities.
“The Exchange will also be seeking to increase the number of listings on all our market segments with focus on the Growth Enterprise Market Segment (GEMS) and the Real Estate Investment Trusts (REITS),” Management said.
During the year, the Exchange will also be upgrading the Automated Trading System (ATS) which will allow it to offer more availability to its trading members and better support its new product and service offerings.
The directors recommend the payment of a first and final dividend for the financial year 2015 of Sh0.49 per ordinary share.
This is an increase of 29 percent compared to the dividend paid for 2014.
The dividend is subject to Shareholders’ approval at the Annual General Meeting.
Pan Africa Asset Management Portfolio Manager Kevin Kiprono says they do not expect a market bull run in the near term as the US Federal Reserve raised interest rates by a quarter percentage point and pledged a gradual pace of increases.
The move will limit action from foreigners who contribute much of the turnover in equity markets.
“Nonetheless, there are stocks that are highly undervalued and present good entry levels thus making the overall equities market a stock-pickers market in 2016,” Kiprono said.
He however cautioned investors to remain neutral in equities with a negative bias.