The other NSE (Nigeria not India), has instituted "funny" changes to trap a very bearish market (has fallen since its peak in Feb). The ones that caught my eye were:
- Banks to reschedule repayments on margin facilities. Earlier in the year, CBN (equivalent to CBK) banned banks from running margin accounts. It basically feared that investors being able to borrow against their shares was fuelling a stock market bubble that could lead to large credit and market losses for the banks. Margin trading is slowly taking off in Kenya (I think around 30% of Safaricom IPO was financed this way), but I expect that we will end up with a similar issues a couple of years down the road unless clear ground-rules are formulated now. Specifically around borrowing limits or even requiring banks to have requisite risk-tools.
- A rule to allow companies to do sharebuy backs (with a 20% ceiling). The spilts (I still think Safaricon could have been offered at Ksh20), bonus issues and multiple right issues we are currently seeing will eventually lead to too much supply against falling or flat demand. Then we'll need something similar to mop up supply.
- Restrictions on new listings: This has already happened once (last March when AK and KenGen were postponed) and may happen again simply because as with (2) above, the market can't absorb any more supply. Alternatively like AK, supply can be restricted by offering shares within restricted application amount.
- Daily shareprice fall restricted to 1%: Very strange rule but again the effect restrict a market correction turning into a bear market. Kenya NSE has 10%+/- restriction.
- Reduction of transaction fees: This would be nice, but unlikely to happen at our NSE.
Overall, the effect was positive with index rises the day after the announcement, but its the sort of thing that can be avoided by controlling broker greed at the outset.