EASEA 10 August 2005 Presentation

Nairobi Stock Exchange Market Reportat the EASEA Consultative meeting in Nairobi 10th August 2005: 

Nairobi Stock Exchange Market Report at the EASEA Consultative meeting in Nairobi 10th August 2005 By: Mr. Chris Mwebesa Chief Executive

TABLE OF CONTENTS : 

TABLE OF CONTENTS Stock Market Key Performance Indicators Market Capitalization and NSE 20-Share Index Interest Rates on 91-Day Treasury Bill Equity Monthly Turnover 2003 vs 2004 Bond Monthly Turnover 2003 vs 2004 Month on Month Inflation comparison and NSE 20 Share Index Dec 2003 – Sept 2004 Structure of Government Debt Average Monthly 91 Day Treasury Bill Interest Rates Sept 2003 – Feb 2005 New Listings

Stock Market Key Performance Indicators : 

Stock Market Key Performance Indicators

Market Performance – Bull Market: 

Market Performance – Bull Market

Average Monthly Interest Rates Feb 2004 – July 2005: 

Average Monthly Interest Rates Feb 2004 – July 2005

Equity Monthly Turnover Comparisons for 2003, 2004 and 2005: 

Equity Monthly Turnover Comparisons for 2003, 2004 and 2005

Bond Monthly Turnover from 2003 to 2005: 

Bond Monthly Turnover from 2003 to 2005

2005 vs 2004 Market Performance : 

2005 vs 2004 Market Performance

Structure of Government Debt : 

Structure of Government Debt

Six months market performance overview- The bullish market in 2005 : 

Six months market performance overview- The bullish market in 2005 Best stock in terms of share price appreciation between 1st Jan. to 8th July 2005

Trend: NSE 20 Share Index & Market capitalization: 

Trend: NSE 20 Share Index & Market capitalization Since Sept 30 2002, the NSE 20 Share Index has moved from 1043.73 to 3,987.04 on July 22, 2005, a rise of 2, 943.31 points, 282.00% change. the market capitalization has moved from Ksh. 85.79 billion to Ksh. 433.10 billion on July 15, 2005, posting an increase of Ksh. 347.31 billion, 404.84% change. Note: Though the share prices of some index linked counters have fallen, market capitalization and NSE 20 share Index have risen for the six months (Jan – Jun 2005) by 30.84% and 28.37% respectively. What we are witnessing is simply a normal market correction as speculators take profits.

Reasons for the Bullish Equity Market.: 

Improved Economic prospects: Agriculture, Tourism, Transport and Telecommunication sectors. Real GDP is forecast to increase from a growth rate of 4.3% in 2004 to 4.8% in 2005 and 5.1% in 2006; Economic activity strongest in the key export sectors of horticulture, tea, textiles and tourism; Modest growth in the manufacturing and telecommunications sectors also underpinned overall GDP growth; Industrials continue to be the heaviest traded. Reasons for the Bullish Equity Market.

Reasons for the Bullish Equity Market.: 

Improved corporate earnings Introduction of Central Depository System ( CDS) – boosted liquidity Reasons for the Bullish Equity Market.

Outlook for Economy: 

Outlook for Economy

Threats:-: 

Threats:- Inflation: could trigger off contractionary monetary policy; If the Government has to resort to the domestic markets for extra funds than anticipated to finance its deficit, this coupled with strong demand for credit from the private sector could cause interest rates to rise higher and faster; Wage escalation and an appreciating shilling would reduce Kenya’s export competitiveness and make her a more expensive tourism destination;

Threats (Contd):-: 

Threats (Contd):- The garment export sector (EPZ) after 4 years of consecutive growth, is now under threat following the end of the Multi Fibre Arrangement in Jan 2005, which has exposed Kenyan producers to low cost Asian producers, particularly China. The industry is expected to continue to suffer from the high cost operating environment and the poor state of the physical infrastructure; Growth could hit electricity generation constraints; Uganda’s politics could unravel, a big hit on Kenyan exports.

Opportunities:-: 

Opportunities:- Kenyan goods continue to exhibit strong export performance there is potential for further growth into the COMESA region and Southern Sudan; Coffee industry reforms could notch up growth by upto 1% per annum in 2006 – 7; Large infrastructure projects in telecommunications, transport and electricity maybe finally taking off, boosting all economic sectors of the economy, if these materialise, real GDP growth can exceed 5.1% in 2006;

Economic Forecast-: 

Economic Forecast- We forecast that the economy will achieve and likely exceed the projected growth rate of 4.8% for 2005 This should be reflected in improved corporate earnings

Outlook for the Market-: 

Outlook for the Market- Barring any major economic shocks we should expect continued improvements in market performance and activity. Market has began to position itself in anticipation of corporate earnings announcements; Activity in the secondary bond market should pick up in the second half of 2005 if interest rates remain stable;

Policy Tax Incentives: 

Policy Tax Incentives

Policy and Tax Incentives: 

Policy and Tax Incentives As an incentive to encourage more listings at the NSE, the Minister proposed that newly listed companies pay corporation tax at a lower rate of 20%, for a period of 5 years, provided these companies offer at least 40% of their shares to the Kenyan public (2005); New and expanded share capital by listed companies or those seeking listing exempt from stamp duty (2000/2001);

Policy and Tax Incentives: 

Policy and Tax Incentives Companies that apply and are listed shall get a tax amnesty on their past omitted income, provided they make a full disclosure of their assets and liabilities and undertake to pay all their future due taxes (2001); Expenses incurred by companies in having their financial instruments rated by an independent rating agency are tax deductible (1997/98); Exemption of stamp duty and value added tax on the transfer of listed securities (1995); Costs of IPOs were made tax deductible (1995)

New Listings: 

New Listings

New Listings : 

New Prospects for Listing include: The Main Investment Market Segment (MIMS) Equity Commercial Bank; Uchumi Supermarkets Rights Issue (Kshs. 1.2 billion); 30% Government stake in Kenya Electricity Generating Company (KENGEN); New Listings

New Listings-cont. : 

New Prospects for Listing include: The Fixed Income Securities Market Segment (FISMS) Faulu Kenya Ltd- Listed 5 year floating rate note of Kshs 500 million on 4 April 2005; PTA Bank Ltd – Listed 7 year floating rate note of Kshs 800 million on 4 July 2005; Athi River Mining 5 year floating rate note of Kshs. 600.00 million bond awaiting CMA approval; EADB second tranche of Kshs. 700.00 million bond; Celtel medium term note awaiting CMA approval New Listings-cont.

Slide26: 

Thank you