Friday, November 30, 2007

Is NSE getting tired of retail investors?

  • A restricted portion of IPOs being reserved for retail investors and subsequent minuscule allocations.
  • Strange allocations for rights issues (NIC had 49% oversubscription thus investors would have expected to get around half of their order, yet anecdotal evidence suggests that most retail investors only got around10% of their order).
There are legit reasons for wanting fewer shareholders;
  1.  Less price volatility-apparently QII are long-term investors
  2. Less admin costs in terms of annual reports, AGMs
Yet, its no coincident that most of the global companies encourage ownership of their shares. The reasons are numerous but here is a few:
  •  Marketing of the brand: if you own Barclays shares, and they are performing, it will be one of the names that resonates when you are looking for banking, employment. Yani its part of your marketing the company
  •  Share liquidity: if a share is not regularly traded, its difficult to see how it will rise
  • Corporate image: being seen to have many stakeholders is good for business especially where it involves mass retail as most do in Kenya
For the brokerage business, high transactions mean more fees so encouraging growth of retail investors is a no-brainer. Yet many have customer services straight out of the civil service.
For GoK, encouraging share ownership is a surefire vote winner. With the proviso,that you know what you are doing in the economy arena.

Bottomline: NSE, encourage Kenyans to the bourse by having preferential treatment of your repeat customers tomorrow and the day after namely the retailer. The NSE and by extension our economy will grow because more of us have a stake in the growth of both. And please define what is a QII (fund managers
pension funds and insurance companies are the ones I have seen so does that mean that Baraka fund  who I know are just an investment group 
(albeit very moneyd one) compete for the same shares as Otieno or Kamau?)


pesa tu said...

The large markets ie JSe aren't for retailers JSE has less than 120,000 CDS equivalent Accounts.
In SA if u r a retailer they direct u to mutual funds.Generally, retailers are expensive to service in terms of admin +other costs

Ssembonge said...

I call this the colonial mentality whereby commoners don't share the same privilages with the aristocrats. It is the right of every Kenyan to own shares.

Brokers should not behave like they are doing retail investors a favour. As long as people can pay the commissions, so be it.

MainaT said...

Pesa-tu, I believe JSE is actually the odd out and mainly due to historic reasons. US and UK markets are very much pro-retail. UK, you can invest £4,000 tax free. US has I believe similar tax-incentives for the retail investor. Japan and even continental Europe also encourage retail investors. Of the emerging markets, China and India are seeing booming retail accounts.

MainaT said...

Ssem,I think many of the brokers can't cope with the increase in numbers over the last couple of yrs.