Gold rush: Kenya doesn't have gold, diamonds et al and the only oil will get will probably be expensively mined. But thank God for the NSE. If you invested Ksh200k in 2002, you have a 30-50% chance of having seen that Ksh200k turn into almost Ksh2m. As with any gold-rush, the pioneers probably staked the richest ores. All is not lost and those looking for opportunities should throw in some serious amounts, because like it or not, Kenya’s great times are ahead of us.
Margin-trading: The new trend in town is of course to take a loan and use it to invest in an IPO. The game being one of margins. For Safaricom, guys are probably thinking that if say they get a loan charging 15% APR, they’ll then only need for Safaricom to get to Ksh5.40 or higher for them to be in the money. That is because they’ll hope to cover the 5% interest charged for the 3 or so months they hold the loan plus the 2.1% commission charged when they exit the IPO position. Are there issues with margin trading of this kind? Yes, if Safaricom doesn’t get to 5.40, some guys will be looking for other sources of finance. Worst-case scenario is that a bank now becomes ones of the largest shareholders of Safaricom. When one considers the risks inherent in share-trading, lending is a dodo. Margin trading also makes share-trading a speculative activity which ion the real sense of the word it shouldn’t be.
High net-worthy and QIIs: Its impractical and a serious disincentive to expect somebody putting Ksh1m in an IPO to wait three months for a Ksh900k refund. That brokers have responded to this by offering QII status to their high-net worthy clients should be seen as good business. The socialist in us all would however not want to see some portions of society getting preferential treatment. So what should be done? How about, allowing high-net worthy (under a pre-agreed criteria) to participate as QIIs but enforce a lock-in for say a period of 12 months?