Thursday, May 07, 2009

Bond issues and the NSE

GoK kicked off '09 with a small-ish but oversubscribed Ksh18bn so-called "infrastructure bond". Since then, its done some smaller issuances. Significantly, its $300m international bond never got off the ground due "le credit crunch". Since the NSE remains sideways, and there are likely to be few takers of its assets on a premium, I can a situation where it continues to issue more t-bills. Result, interest rates will climb slowly upwards.

Corporate bonds are also on the way:

  • Safcom confirmed its forthcoming Ksh12bn issuance although I don't recall it retiring the other lot. The funds are apparently to upgrade network in preparation for fibre optic.
  • Centum has a Ksh4bn bond, though only 2bn in '09-see excellent investor presentation here. Centum wants to take advantage of low prices as well launch a private equity and a real estate fund
  • KenGen has several bonds coming into the market including a Ksh15bn this year.

Apart from the well-known supply-side factors contributing to the inflation situation, the other has to be amount of cash in the economy lying idle. Some of it is finding it way into real estate, with a bubble now building up nicely in prime areas.

So what of the NSE? Well market cap is now down Ksh300bn from last July's high (admittedly Safcom induced) to Ksh680bn. Although some of the bucks are hotmoney, a significant portion is being diverted to everyday uses until the NSE cleans up its act. And the economy picks up.

For banks, the bonds will further compress interest rate margins, but also offer stable earnings.

No comments: