TIGblogs - Geoffrey Kipyegon Koech's TIGBlog

TIGblogs - Geoffrey Kipyegon Koech's TIGBlog http://Kip.tigblog.org/ What's on the minds of young leaders from around the globe? en-us Wall Street Crisis http://Kip.tigblog.org/post/481445 Dear readers,
After many Month of absence from the blog scene due to some unavoidable circumstances am happy to be back and rolling!!!! yepyyyyyyyy...

Crisis
However and quite sadly the goings on at the World's famous Street has led to financial contagion across the other markets of the world and many investors are loosing alot of money in their cherished financial assets.

Short Selling
The emegence of this crisis fueled by the Subprime mortgage crisis led to panic across major markets. This neccessitated the drastic drop in the prices of vibrant and fundamentally strong companies across the globe.

Short selling
Short selling a phenomenon involving selling of borrowed shares in the hope of replacing them as prices continue to fall became the order of the day.
This did not augur well for most of the counters amidst rapid flow of information from one continent to the next.

Rescue package
As the Wall Street giants continue to wallow in financial crisis and illiquidity, the Fed government's rescue of Fannie Mae, Freddie Mac and AIG demonstrated clearly that the financial turmoil continues on Wall Street and it is a matter of time before sanity resumes and investor confidence is restored.

Financial Contagion
Other major stock markets also tumbled with news of this crisis including Russia, Paris,Toronto, Germany, Asian Markets as well as emerging African markets amongst others.

Kenya
The Kenyan stock market was no exception and neeedless to say that most of these Wall Street investors had ventured into the Kenyan market through the much touted Safaricom IPO and their crisis in the far west will impact negatively in our market.
AIG for example is a major player in the stock market investing substanbtial amounts for perosns in Kenya and also abroad and more especially those who are keen on investing in emerging markets.
The rescue package might have come as a sigh of relief but time will tell where the markets are headed despite the slight rebound. Whether south or north!

Financial Reforms
The onset of this crisis has laid bare the need for stringent financial reforms to protect investors assets from rapid erosion once fundamentals change though in the slightest of ways. Further these reforms would ensure proper management of our financial markets and regulations of all financial innvoations icluding derivatives that are widely traded across the globe though not fully appreciated and understood by many.

Political will
This is imperative if rapid reforms and proper infrastructure is to be set up to avoid continuous problems facing investors young or savvy both in the developed economies of the world as well as the rapidly emerging markets.

]]> Fri, 19 Sep 2008 05:09:00 EDT http://Kip.tigblog.org/post/481445 -1.2833333 36.8166667-1.283333336.8166667 Safaricom Much touted IPO: Bits and Pieces http://Kip.tigblog.org/post/346629 D-day At Last

Kenya's largest mobile telecommunications network service provider, Safaricom, will launch its initial public offer March 28 and closes on April 23 taking a total of 26 days. This offer for sale will give Kenyans amble opportunity to invest.

Stakes

The government will offer 25% of the issued ordinary shares of Safaricom. The IPO will offer 10 billion shares priced at 5 Kenyan shillings a share, which implies a value of KES200 billion ($3 billion).

High Expectations

Thw Governement hopes to raise KES50 billion from the IPO, which will be used to finance development programs and hopefully to supplement the budgetary deficit that had been witnessed in the FY 206/07.

Pools

The offer will be split into two pools - domestic and international. The international pool will be open to institutional investors only. The price will be determined through a book-building.

Investors in the domestic pool will have to buy a minimum of 2,000 shares. This means that any Kenyan intending to invest (and i know many including mama mbogas) are keen to have a stak of this 'sexy pie' and probably make a kill when it comes for trading in may.

Market Share

Safaricom's estimated market share at the end of December was 80%. The company has nearly 10 million subscribers.

Advisors

Morgan Stanley and with local investment bank, Dyer amp; Blair are the transaction advisors alongside other banks as citibank.

Official IPO site

The official IPO site is here

]]> Sat, 22 Mar 2008 02:03:00 EDT http://Kip.tigblog.org/post/346629 -1.2833333 36.8166667-1.283333336.8166667 NSE will be most Volatile in 2008 http://Kip.tigblog.org/post/339267 Crisis
It is now evident that if the current political crisis is not resolved as soon as possible the NSE that is often the barometer of economic growth is in for the most volatile period with suppressed activity despite entry of foreign investors into the market.

Facts
Since the year began, the NSE has shed Sh44 billion in market capitalization from a high of Sh851 billion at the beginning of the year to Sh810 billion as at the close of trading yesterday - a five per cent drop.
During the same period, equity turnover has declined by almost 30 per cent from daily trades worth Sh505 million on December 24 last year to Sh347 million at the close of trading yesterday.

Economic Slowdown
Economists had predicted a slow down in the economy pointing to a dip in tourism revenues, disruption of agricultural production and lower business turnovers in the wake of recent political turmoil.

Investor Confidence
Pundits have been quite to point out that a speedy resolution of the current stalemate and rejuvenated investor confidence is key to a speedy economic recovery and renewed momentum in the equity market.

Post Election Violence
The outbreak of post-election violence has eroded investor confidence in the market leading to some of the most aggressive sale of shares at the bourse with retail investors as the most active.

January/February Trades
The market was throughout January characterised by thin trades with retail investors - rushing to liquidate their positions in the short term - as the main sources of supply.

Institutional Investors
Battered investor confidence has seen institutional investors concede that any resumption of normalcy at the stock market depends on a speedy settlement of the political crisis.

]]> Wed, 27 Feb 2008 06:02:00 EST http://Kip.tigblog.org/post/339267 -1.2833333 36.8166667-1.283333336.8166667 The Aftermath of Election 2007 on economy http://Kip.tigblog.org/post/339269 Volatility
The Nairobi Stock Exchange will remain volatile for most of 2008 reflecting the turbulence in the political arena that has been witnessed since the announcement of the controversial December 27 General Elections.

Downsizing
Most companies are now bracing themselves for downsizing and other restructuring measures geared towards cost cutting and enhancing profit margins.

Reduced Profitability
The profitability that has been witnessed in most banks at the beginning of the previous years quarterly results may be no more and by and large greatly reduced.

Economic Growth
The economic growth rate although deemed to remain resilient may not be sustainable if the spate of violence continue into the next quarter of the year and the government revenue collections will be greatly hampered.

Pillars of Vision 2030
The pillars of Vision 2030 that had been lauded to steer Kenya into rapid economic growth phase including Business Process Outsourcing (BPO), Information technology, Tourism and telecommunication are now reeling from the effects of the post election violence.

]]> Wed, 27 Feb 2008 06:02:00 EST http://Kip.tigblog.org/post/339269 -1.2833333 36.8166667-1.283333336.8166667 Kenya Economy Reeling From Post Election Violence http://Kip.tigblog.org/post/321467 Economy
The orgy of violence that has greeted Kenya's disputed election result has led to hundreds of deaths and forced tens of thousands to flee their homes.The post election violence witnessed in various parts of Kenya has indeed raised pertinent questions on the resilience of the economy to sustain long periods of civil unrest and violence.

Tourism
Kenya's tourism industry, which brings in some $900m (£455m) a year and attracts more than one million visitors a year, is sure to take a hit after four days of rioting and ethnic clashes. Its relative economic success has been helped in part by its thriving tourist sector, with visitors attracted by its abundant wildlife and pristine beaches.Provisional figures for 2006 from the Kenya's tourist board said the country had received 1.5 million visitors for the year, a growth of 5.2 per cent.

Repercussions
The stalemate over the election results has cost the economy billions of shillings with the repercussions being felt across East Africa.

Bankers Analysis
Several bodies including the Treasury, Nairobi Stock Exchange, Tourism sector, and financial organizations have given their predictions and analysis of the implication of the destruction and sporadic violence that errupted in the country against a backdrop of controvesial presidential elections and delays in announcements.
The effects are indeed immense and portends widespread implication for Kenya as an emerging economy that has recently been rated the fast growing and most preferred by investors seeking emerging markets.

East Africa
The pinch on the economy is not only being felt locally with close to 4B having been lost but has spilt to Uganda, Tanzania Rwanda and Burundi where essential products were not forthcoming as fuel passing through Kenya was unavailable due to closure of roads and violence.

Central Bank of Kenya analysis
Kenya’s economy has grown steadily in the past five years with all indicators pointing out that if the trend was sustained, growth would hit 10 per cent. The economic recovery that started in 2003 has achieved some major milestones and laid down solidly the growth fundamentals. The growth fundamentals laid down have reversed growth decline that had taken years. It is true that the recent violence in some parts of the country could adversely affect the tempo of economic activity, but cannot destroy the growth fundamentals so far laid down. more

Foreign investors
Private investment has been behind Kenya's thriving economy. It has averaged GDP growth of 5% since 2002 and the economy is expected to expand by 7% in 2007 - rates of growth that are only beaten in booming Asian countries such as China.
Kenya's shilling strengthened by 9% against the dollar in 2007 as foreign investors poured into the country's stocks and bonds, but those gains were largely erased when currency markets began trading on Wednesday.

Equity Market
The equity market on the Nairobi Stock Exchange lost 40 billion Kenyan Shillings ($591 million) in value on its first day of New Year trading Wednesday. Kenya has attracted a large number of multi-nationals and is home to one of the world's fastest growing stock exchanges.

Positive Prospects
Expected planned sale of Safaricom shares might stir the market once again back to its feet .

]]> Fri, 11 Jan 2008 10:01:00 EST http://Kip.tigblog.org/post/321467 -1.2833333 36.8166667-1.283333336.8166667 The Allure of NSE Growth Despite Electioneering Politics http://Kip.tigblog.org/post/319911 20-share Index
It is noteworhty that the Nairobi Stock Exchange (NSE) came from an earlier 10% plunge this year to exploit one of its most prosperous years of the decade with the 20-Share Index, rising to above 6,000 points at one point.The phenomenal growth of the 20-share index, a reflection of the investors' growing wealth, is expected to continue into the New Year as the capital and financial markets shed fears of political uncertainty, expected to end with the December 27 presidential polls.

New Listings
This year's stock market trade was continually dominated by the events of 2006, which saw the successful listing of the Kenya Electricity Generating Company (KENGEN). This warmed the once dormant market and brought in 250,000 first-time investors.The NSE owes its milestones this year to the increased market confidence, exemplified by the coming to the market of family-owned businesses. The listing of the Scangroup, a multiparty marketing, advertising and research firm and Access Kenya, enabled the NSE to diversify its source of income and grow its market capitalization to new heights, with the later becoming the first ICT company on the bourse.

Panic Selling
The market took a mid-year beating from political activity this year with the 20-Share Index plunging by 9.24% due to panic selling of shares, mainly by the first-time investors who did not understand the meaning of market correctional activities.The June market plunge initially seemed to be a bad precedent but it came as a blessing in disguise as foreign fund managers, who had exited the market in the mid-1990s, and had been watching the market from the sidelines, came back rushing to buy the shares.

Collapsed Stock Broker Replaced
Investors panicked after the market regulator took action against Francis and Thuo Partners, one of the oldest stockbrokers, which was found to violate trading rules by using investors' funds without consent.Mr. Francis Thuo was replaced by Renaissance Capital, which purchased the seat at Ksh420 million. The money was used to partly pay off investors who had lost money with the collapse of the rogue investment firm. The NSE paid up over Ksh.200 million.

Investor Numbers
The number of investors at the NSE rose to historical levels this year to hit 750,000 compared to the 80,000 investors who traded at the NSE in 2003. The NSE, however, estimates that only 100,000 shareholders trade actively. NSE still faces stiff challenges, especially on investor education, a portfolio which falls with the market regulator, the Capital Markets Authority (CMA). The NSE reached its decision to sell the vacant seat to the Russia-registered Renaissance Capital in a bid to deepen the capital market in Kenya, by bringing in foreign capital.

Renaissance Capital and Morgan Stanley
RenCap ecured a stockbrokerage license from the CMA, allowing it to enter the growing market in Kenya, while one of the world's greatest investment banks, Morgan Stanley, also gained entry into the Kenyan market, thanks to the pending Safaricom listing.
Morgan Stanley partnered with Dyer and Blair Investment Bank to win the coveted bid for transaction advisor for the Safaricom Initial Public Offer (IPO), which is expected to be the next big bang in Kenya's capital market.The mega deals which dominated the NSE in 2006 trickled over into 2007, constantly putting bourse on a steady growth path and shaping the market activity.

Kenya Reinsurance
State re-insurer, Kenya Reinsurance Corporation, statutorily allowed a 30% share in any insurance deal in the market, also came to the market this year, bringing on board a hoard of fresh investors, both local and foreign, who came to profit from the June meltdown.

Market Capitalization
This year, market capitalization increased to historical levels, from Ksh112.5 billion in 2002 to Ksh732 billion in mid 2007 before peaking at close to Ksh800 billion in December.
The 20-Share Index has also stabilized at an average of 5,500 although it breached the 6,000 mark within the year before taking a deep plunge due to political volatility. The growth of the share index from 1, 364.85 in 2002. The index stood at 5,332.03 as of 11 Dec.
The share index shed nearly 600 points in October this year, closing the second week of the month at 5005.89 points compared to a high of 5611 points in early September.

Scangroup, Equity, PTA and Barclays
The listing of 69 million Scangroup shares, the Equity Bank placement in the market's main investment segment, the listing of the PTA Ksh1 billion bond, the listing of Barclay's three-year corporate bond of Ksh5 billion, played as major movers of business.

Banks Profitability
Stock market analysts say the first six months of the year was dictated by the high after tax profits posted by the listed commercial banks increased.

Parting Shot
The new year portends new growth heights for the NSE as foreign investors flock into the Kenyan market after a decade of shying away. This is a clear indication that Kenya as an emerging market is going places.

Don't be left out!!!!

]]> Fri, 21 Dec 2007 09:12:00 EST http://Kip.tigblog.org/post/319911 -1.2833333 36.8166667-1.283333336.8166667 Banks Analyst at its Best http://Kip.tigblog.org/post/319913 bankelele either physically or through his avid analysis and many have become members of his blog. Each day he continues churning surprsising pieces of analysis on various topical business issues and sometimes a dose of the pilitic-business.

Among his latest works is an analysis of the banking sector.

Read more of (part1) here and (part 2) here.

Hats of Banks for analyzing our banks!!!!!

]]> Thu, 20 Dec 2007 11:12:00 EST http://Kip.tigblog.org/post/319913 -1.2833333 36.8166667-1.283333336.8166667 The Changing Faces of Banks in 2007 http://Kip.tigblog.org/post/319915 Radical changes
The banking sector has come a long way and with mergers and acquisitions in the offing as well as the emergence of near financial supermarkets the future is indeed bright for our banks.

Investors
Most investors in banks stocks have often made a kill over the last few years with splits, dividends, bonuses and price appreciations having been witnessed.

New products
The banking sector is indeed undergoing radical changes and new products are being unveiled everyday target the larger populace as oppossed to the big-mans-bank syndrome that had been evident a few years ago. Banks are now literally going to the streets to hawk their wares and sell the loans to every would be buyer with little or no requirements at all.

Interest rates and competition
Interest rates have dropped drastically as banks strive to offer cheap products to borrowers for their businesses and other needs.Competition in the banking industry is indeed evident and every new day new banks are emerging.

New Banks
Most non deposit taking institutions are now converting into microfinances and finally banks in a matter of years and the number of banks is increasing by the day.

Banking stocks
The banking stocks have continued to soar to new record highs never witnessed before as investors both local and foreign rally to buy them.

Cross border trading
These banks have even dared to cross border to other regions talk of KCB in Uganda and southern Sudan where it continues to serve its customers. Others are savouring the region for strategic partners to inject new blood inform of liquidity into the system talk of Equity and Helios deal as well as Stanbic and CFC deal.

Stock broking
Other banks are craving for a piece of the stock market pie with ventures into stockbroking. NIC failed bid for the stake of the collapsed Francis Thuo (won by renaissance capital) has seen it partner with another securities dealer. Talk about slowly getting their.

Asset Finance
Asset finance is becoming the talk of town with considerably lower interest rates charged by banks for the same. This was started by NIC bank but now adopted by NBK, KCB, Equity, Family Bank, Stanbic and the list is growing.

...and the changes go on...

]]> Thu, 20 Dec 2007 10:12:00 EST http://Kip.tigblog.org/post/319915 -1.2833333 36.8166667-1.283333336.8166667 Of Investment Groups and Target Products http://Kip.tigblog.org/post/319917 Investment Club
Now that it is evident that over the recent past, the number of investment clubs also called investment groups has grown phenomenally. An investment club is a group of individuals who meet on a regular basis for the purpose of investing money.

Contribution
The invested sums can be as little as $10 a month. The first investment club on record dates back to the 1800s in Western America. Various online communities devoted to this type of investing have recently emerged and have contributed to the personal investing boom in the United States. One of the reasons that people come together in investment clubs is to learn how to invest. While investment clubs are commonly organized with members contributing money and investing as a group in a single club portfolio, members of other self directed Investment clubs simply meet and learn about investing but invest on their own. With the advent of computers and the internet investment clubs have also moved into cyberspace.
Investment clubs are generally formed as general partnerships, but could also be formed as limited liability companies or limited liability partnerships (in states that allow them). more on wikipedia

Membership
Joining one has become almost the norm. An investment club is typically a group of family, friends or co-workers who have teamed up together to pool funds and invest them collectively in assets such as the stock market and real estate.For an investment group to work, it is important for you to look for like minded individuals who are committed and intent on going to the next level. Look for people who want to share research and knowledge about the market. Look for people who are pursuing different careers from your own so that you can have a mix of ideas. more on businessdaily.

New Products
Equity Bank, Britak and Housing Finance have launched a product targeting these investment groupds dubbed Hekima Milele that ius set to radically change the way investment groups have been doing their business. Talk about a financial supermarket and its new products!

Tips
Some useful tips on starting and running a successful investment club are available. Smaple this:
-How to start a club i.e starting and running profitable investment clubs.
-Learning from the wonderful world of proshare investment clubs.
-Endeavoring to undertake better-investing.
-Australian stock exchange tips on investment clubs.

]]> Fri, 07 Dec 2007 06:12:00 EST http://Kip.tigblog.org/post/319917 -1.2833333 36.8166667-1.283333336.8166667 2007: My Twelve Reflections http://Kip.tigblog.org/post/319919
1. The stock market during the early part of the year was abuzz and on a crazy upswing mode and many investors did make a kill.
2. New entrants into the stock market exclusive leage-Renaissance capital is already making inroads into the equity market with plans to invest more in stocks come the next years.
3. New IPOs slated for the year were realized but the mother of all IPOs is still being awaited and investors are bracing themselves for a bruising battle come the release. Despite the dragging court cases the governement is still determined to sell this cashcow and seal the deficit hole in thw budget that is over Kshs100B.
4. The shilling realized significant gains and is now on new highs with strong inflows from:
-Shs 26B purchase of 51% stake in Telkom Kenya.
-Transcentury continues to spur investment area with its new ideas from the spindoctors therein. It is now selling its shares to the strategic investor.
-The prospects of the dollar on the global front is dwindling
-Foreign investors flock to the NSE to get a stake in some of the blue chips and Kenya is the new emerging market where foreign investors are diverting their investments.
5. Equity continues to surprise us despite fears of imminent collapse with new profitability feats and innovative product and now the sale of 24.9% stake to Helios-a strategic partner. What more can we say it is going from strenngth to strength and their stocks might be worth your pennies...
6. The banking sector was abuzz with profitability and more is yer to come.These stocks are good buys dont you think?
7. The emergence of the pyramid schemes that fleeced many investors their hard earned monies and left many crying remember Deci, CLIP, Sasanet and many others?
8.Many investors woke up to the realization of the stock market as an investment destination.
10. Tourism earnings and prospects are good and the earnings from this sector are set to rise exponentially come the next year.
11. The economy grew by over 6% and whether this translated to more money in our pockets is subject to discussion.
12. Business Process outsourcing (BPO) the new craze in town for kenya as an emerging market and this is expected steer our country to the leagues of India and other fast growing economies.

more to come.......

]]> Thu, 29 Nov 2007 01:11:00 EST http://Kip.tigblog.org/post/319919 -1.2833333 36.8166667-1.283333336.8166667 Implications of Strengthening Kenya Shilling http://Kip.tigblog.org/post/319921 Kenya Shilling
The Kenya Shilling has been on an upward trend in recent past and this is attributed to the entry of foreign investors into the market that has rallied the Kenyan shilling to new highs.

New Highs
Yesterday, the shilling settled at one of its strongest positions to the dollar at a mean rate of Sh65.40, the strongest level since 1999.

Causes
The strengthening of the local currency against the US dollar was steered by increased foreign exchange inflows amid subdued demand from:
1.Foreign Investors rallying to invest at the NSE including top Wallstreet operatives.
2. Offer by Helios, an international investor, last week by buying a 24.99 per cent stake in Equity Bank worth over Sh11 billion.
3. This was followed by news that France Telecom would acquire a 51 per cent controlling stake of Telkom Kenya worth Sh26 billion.
4. Increased demand for the shilling from exporters to meet end month demands.
5. Increased tourist reception into the country with projections likely to go higher with the festive season approaching despite the impending electioneering period.
6. Strategic positioning by various players before the anticipated upcoming Safaricom IPO.
7.Other variables

Players in the forex market include:
-Interbanks
-Commercial companies
-Central Banks
-Hedge funds
-Retail and forex brokers
-Investment management companies

Effects
1. Exporters will face challenges of penetrating foreign markets as exports become expensive
2. There will be a significant reductions in local revenue terms for exporters.
3. Kenya will become expensive to trade with.
4. Net foreign exchange earnings will go down.

]]> Wed, 21 Nov 2007 10:11:00 EST http://Kip.tigblog.org/post/319921 -1.2833333 36.8166667-1.283333336.8166667 Financial Market Engineering in Kenya http://Kip.tigblog.org/post/319923 1. Economies of scale,
2. Reduced transaction costs, and
3. Enhanced trading liquidity.
New market systems also create major risks for exchanges and their operators stemming as a result of competitive forces unleashed by open, global markets and real-time access.

Engineering questions to address for each of these three areas are:
1. Microstructure – What auction or other negotiation protocol serves in the interest of participants? Which protocols are innovative and applicable?
2. Infrastructure – How can the market protocols be implemented in a decentralized, highly scalable IT architecture? What technologies should be used? Which capacity and functionality demands have the highest priority?
3. Business governance structure – Who controls the market as an organization, and enhances its financial performance? What are the promising revenue models? Which services should be offered to whom at what price?

Since the outcomes from configuring these three dimensions today are still imperfectly understood, designing markets remains a challenging task. The approach of market engineering proposes that the design of electronic markets be approached holistically. Holistically means that all areas of the design – the microstructure, the infrastructure as well as the business structure – are simultaneously considered. The configuration of these different dimensions of a market is
guided by a structured engineering process.

As we strive to enhance the performance of our financial markets, it is imperative that we consider:

-Best Execution – What do we want from our markets?
-Innovative Products, Trading Mechanisms, and Services for Electronic Markets;
-Performance of market platforms;
-Auction and matching techniques;
- Models, methods, and tools for financial market
engineering; and
-Integrating mechanisms for multiple market modalities.

Growing our emerging market is challenging but realizable. Lets build our financial markets to status of the top dogs!!!

]]> Wed, 21 Nov 2007 10:11:00 EST http://Kip.tigblog.org/post/319923 -1.2833333 36.8166667-1.283333336.8166667 Trancentury Going Public? http://Kip.tigblog.org/post/319925 Transcentury that it is undertaking a private placement for 4,213,500 shares representing 17.7% of the company at a price of Ksh.712.00 per share.

More by ribacapital...

]]> Wed, 14 Nov 2007 10:11:00 EST http://Kip.tigblog.org/post/319925 -1.2833333 36.8166667-1.283333336.8166667 The Rise of Freeconomics http://Kip.tigblog.org/post/319927 As the day draws closer, many free-economists are churning various theories of the free things we are likely to enjoy come the general election.
Free...
Sample this:
-Free food for the needy
-Free primary and secondary education
-Free clothing for those without
-Free transport vouchers for the poor
-Free ports
-Free country
and the list goes on and on...

Well i am not alluding to any political inclination, but i am disturbed by the freeconomics being churned out in the bid to lure the electorate at the expense of real issues that bedevil our economy and investors at large.

Sample this from Moore's Law
"What happens when things get (nearly) free?" His answer is that you waste them,You use them profligately, extravagantly, irresponsibly. You shift out of conservation mode and get into exploitation mode. You do crazy things ...like promising the average email user that they'll never have to delete another message to conserve space. We will all learn how to waste newly abundant resources, retraining our minds to ignore our instincts about costs and scarcity.

Just a thought!!!!

]]> Wed, 14 Nov 2007 09:11:00 EST http://Kip.tigblog.org/post/319927 -1.2833333 36.8166667-1.283333336.8166667 Financial Sector Deepening Panacea for Emerging Markets http://Kip.tigblog.org/post/319929 Financial deepening
This refers to the increased provision of financial services with a wider choice of services geared to all levels of society.It also refers to the macro effects of financial deepening on the larger economy. More financial deepening generally means an increased money supply. The more liquid money is available in an economy, the more opportunities exist for continued growth.
It can also play an important role in reducing risk and vulnerability for disadvantaged groups, and increasing the ability of individuals and households to access basic services like health and education, thus having a more direct impact on poverty reduction.

Financial Markets
In economics a financial market is a mechanism that allows people to easily buy and sell financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other items of value at low transaction costs and at prices that reflect the efficient market hypothesis. Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.

Growing Interest in financial deepening
There has been a growing interest, around the developing world and economies in transition, in the promotion of rural financial deepening. The hope of better risk sharing, more efficient allocation of capital, more productive investment, and, ultimately, higher standards of living for all is propelling the drive for stronger connections between financial systems across the world.
Moreover, attention has gradually shifted, from the earlier exclusive emphasis on credit,
towards a growing recognition of the importance of different types of financial services,
including:
-Deposit facilities and similar means to accumulate liquid reserves and hold
stores of value.
-Payments instruments and opportunities to send and receive remittances
and to exchange currencies and
-Mechanisms to manage liquidity and cope teh risks.

Asian economies, particularly emerging markets, are taking an active part in this quest, at both the regional and global levels. At the global level, Asia's integration with the international financial system is well advanced.

Financial Integration
In the years since the 1997–98 financial crisis, Asian governments have affirmed their intention to promote financial integration at the regional level with a view to both reducing vulnerabilities and improving the allocation of savings. A series of initiatives have been launched to boost regional self-sufficiency, ranging from information sharing to financing arrangements in foreign exchange. Governments are also taking steps to deepen regional bond markets to reduce reliance on bank financing and to shelter the regional economy from the possible repercussions of future volatile capital flows originating elsewhere in the world.

Financial Sector Deepening in Kenya
The Financial Sector Deepening (FSD) Trust was established in early 2005 to support the development of financial markets in Kenya as a means to stimulate wealth creation and reduce poverty.more

]]> Thu, 08 Nov 2007 12:11:00 EST http://Kip.tigblog.org/post/319929 -1.2833333 36.8166667-1.283333336.8166667 Safaricom Hullabaloo http://Kip.tigblog.org/post/319931 Nonetheless, there have been contradictory information coming out from several quarters with the government determined to ensure its budget deficit is reduced with the proceeds from privatization programs.
Safaricom is expected to rake in 34B. Some however have hinted that the IPO will take place between 1st and 14 December so as to allow investors time to vote during the 27th December General Elections.
Everyone is watching and despite the recent court case by some ODM members the government's determination is unrelentless.

]]> Thu, 01 Nov 2007 06:11:00 EDT http://Kip.tigblog.org/post/319931 -1.2833333 36.8166667-1.283333336.8166667 Kenya Capital: TPS Stock to Watch in 2008 http://Kip.tigblog.org/post/319933 TPS is a stock to watch in 2008.
Given the trend that tourism in Kenya is expected to take with expectations of increased tourist in the next 5 years, this will translate to increased revenue for this company that has spread its tentacles accross east africa. TPS is well positioned to rake in higher returns and better stock prices.

Check out my earlier analysis on this company set to benefit from tourism upswing.

]]> Wed, 24 Oct 2007 01:10:00 EDT http://Kip.tigblog.org/post/319933 -1.2833333 36.8166667-1.283333336.8166667 The Hot Seat that is Safaricom CEO http://Kip.tigblog.org/post/319935

Being the CEO of Kenya'a most profitable company is no mean feat and many corporate CEO's are now envious of their unparalleled achievements and would wish to occupy this higher pedestal.

Safaricom's CEO

Michael Joseph has been at the helm of Safaricom since inception and with his contract coming to an end in the first quarter of 2008, picking the CEO of Kenya’s most valuable and successful company would appear as a big political concession that any regime would like to lose.

Succession Plan

Mr Joseph has been an asset to the firm, which has not put in place a well thought out and well publicized succession plan. The risk of losing a successful manager at a time when the company is preparing to go public would have made investors skittish. more

Syndicated Loans

Safaricom owes a syndicate of banks Sh12 billion and with the fast growth that the company is experiencing, it still needs the ability to tap both the equity and debt market for cash.

IPO

Treasury is seeking to sell 25 per cent of its 60 per cent stake in Safaricom to the public through the NSE in a transaction expected to net at least Sh34 billion and billed as the largest sale ever in the Kenyan capital market.

Telkom Kenya

Already, a number of investor including British Telkom, France Telkom and South Africa Telkom have lined up to purchase a 51 per cent stake Telkom Kenya in deal worth Sh5.6 billion. The stake is set to be transferred to the winning bidder on November 26th.

]]> Wed, 24 Oct 2007 01:10:00 EDT http://Kip.tigblog.org/post/319935 -1.2833333 36.8166667-1.283333336.8166667 Foreign Investors Back with a Bang http://Kip.tigblog.org/post/319937 Foreigners Flock NSE
Despite the recent jitters about the stock market that saw various politicians make remarks about the stock market, indications are ripe that foreign investors are not shying away from the Nairobi Stock Exchange.
Infact over the last few weeks insiders have it that foreign investors are now flocking the NSE. Their deals in some days have accounted for more than 40 per cent of the trades in a number of counters.

Blue Chips
It appears that the target of this investors are blue chips including, East African Breweries Limited (EABL), Kenya Airways (KQ), Barclays Bank (BBK), Kenya Commercial Bank (KCB), Mumias Sugar Company (MSC), Kenya Electricity Generating Company (Kengen) and recent debutant to the NSE Kenya Reinsurance (Kenya Re) amongst others.

Economic Fundamentals
It is noteworthy therefore that the re-entry of foreign investors into the local equity market is a clear indicator of the strong perception of the country’s economic fundamentals and favourable corporate earnings projections in the country despite the impending elections that has been expected to send these investors packing due to uncertainty of the election outcomes.

Political Comments
The recent reassurance by some presidential candidates on their support for the goings-on at the NSE against a backdrop of earlier negative comments on the sam market is welcome and is a positive signal to more foreign investors as well as local investors to flock the NSE in preparation for the Safaricom IPO.

Safaricom IPO
There are strong indications that various players across the global divide (From Wallstreet to Kimathi Street) are positioning themselves to invest in this most profitable company that raked in 17B profir last year and expected to beat such feats given its current products that have been positively received by customers including MPESA service. Their expansion programs are also welcome and it is a matter of time before we proudly own THE BETTER OPTION.

]]> Thu, 18 Oct 2007 01:10:00 EDT http://Kip.tigblog.org/post/319937 -1.2833333 36.8166667-1.283333336.8166667 NSE Amidst Electioneering Frenzy http://Kip.tigblog.org/post/319939
Big Investors
Traditionally the big-time investors take a wait-and-see stance during an election year and the result is sluggish economic activity, which could result in slower GDP growth. On the Nairobi Stock Exchange, which is a barometer of economic performance in the country, share prices nosedive.

Political Uncertainty
Kenya’s equity markets could face their hardest test in four years amid heightened volatility caused by political uncertainty ahead of the general election. Massive offloading of shares by individual investors in anticipation of the Safaricom Initial Public Offering could also spark market fluctuations and depress market activity.more
Already, the market is showing signs of a slow down with the benchmark

NSE Index
NSE 20Share index that tracks the performance of the 20 select listed companies, threatening to dip below the 5000 point mark.In the last one month, the NSE 20 Share index has shed an estimated 600 points, closing last week’s session at 5005.89 points compared to a high of 5611 points in early September.

Election Frenzy
The looming general election in Kenya cannot escape investors’ minds. As much as they wish to celebrate a new beginning and the anticipated Safaricom IPO, at the back of every investors mind is a dark cloud of uncertainty as to what the election frenzy will bring to the bourse.

]]> Mon, 08 Oct 2007 11:10:00 EDT http://Kip.tigblog.org/post/319939 -1.2833333 36.8166667-1.283333336.8166667 SME Listings at East African Bourses http://Kip.tigblog.org/post/319941 SMEs
Small and Medium Enterprises play a vital role in any emerging economy. In Kenya the emergence of microfinance banking has catapulted the growth of SMEs.

East African Exchanges
NSE, DSE and USE collectively the East AfricanExchanges have plans to allow the listing of SMEs through relaxation of the stringent listing requirements that characterise these marts. The tough floatation rules have hindered most SMEs from floation their shares through IPOs.

SME Listings
The listing of small and medium-sized enterprises (SME) is expected to provide more shares at the market, allowing investors to diversify their investments and help spread liquidity, which has at times distorted the valuation of some shares.The development, which will also be replicated by Kampala and Dar-es-Salaam bourses, will catapult the region into the same level with developed and middle level economies which allow listing for SMEs as a way of enhancing their contribution to the economic growth.

Regional Bourses Agree
The opening up of the regional bourses to SMEs by late 2008 was agreed on by the Kenya, Uganda and Tanzania heads of stock exchanges at the East African Securities Exchange Association (EASEA) meeting held in Kampala on September 7. This will spur the trading in the yer to be established over the counter market at these stock exchanges.

]]> Thu, 04 Oct 2007 02:10:00 EDT http://Kip.tigblog.org/post/319941 -1.2833333 36.8166667-1.283333336.8166667 Microfinance banking set to spur economic growth http://Kip.tigblog.org/post/319943

Silence

After a couple of weeks of silence in this blog due to travel and work demands i must apologize to my avid readers for some dissapointment with my postings which havent been forthcoming.

Microfinance Banking

Microfinance is a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. By helping them to accumulate usably large sums of money, this expands their choices and reduces the risks they face.

Today after reading the case of Equity bank and others seriously following suite including the hirtheto big mans banks of yersteryears that are now hawking loans and other products,i was drawn aback to the role of microfinance banking in economic growth and profitability.

Internation Year of Microfinance

Today, microfinance plays a major role in the development of many African, Asian, and Latin American nations. Its impact is substantial enough to have warranted acknowledgment by the United Nations who declared 2005 "The international year of microfinance", reminding people that millions worldwide benefit from microfinance activities.

Economic Growth

It is generally accepted that long-term sustainable microfinance programmes hold enormous potential for national economic growth and development. Many microfinance institutions have sprung up and some are already applying for banking licenses. The future is indeed brighter for microfinance with the passing of microfinance bill in parliament. more

Accollades

Microfinance institutions are indeed set to change the course of business in the world. Case studies of Equity in Kenya and the Bangladesh bank attest to this. Both institutions have already wone various accollades for their work.

]]> Thu, 04 Oct 2007 01:10:00 EDT http://Kip.tigblog.org/post/319943 -1.2833333 36.8166667-1.283333336.8166667 Asset Finance:The New Craze in Town http://Kip.tigblog.org/post/319945 What is it?
This is typically structured as a line of credit secured by a specific asset or across a combination of existing assets. It encompass using balance sheet assets (such as accounts receivable, short-term investments or inventory) to obtain a loan or borrow money - the borrower provides a security interest in the assets to the lender. This differs from traditional financing methods, such as issuing debt or equity securities, as the company simply pledges some of its assets in exchange for a quick cash loan.
This type of financing is typically used for short-term borrowing or working capital. Companies using asset financing commonly pledge their accounts receivable, but the use of inventory assets is becoming more frequent.

NIC Bank
Every once in a while our customers require a helping hand to finance their assets. NIC Bank for example ventured into helping customers to acquire their assets with ease, whilst keeping our pricing very competitive. This augured well with the market and helped the company reap massive returns.

Asset Financing Now
Asset financing has become a major competitive ground for banks as they seek to increase their interest income-based revenue. Banks are competing on interest rates, collateral arrangements and longer repayment periods to persuade customers to take up this line of credit.
Already, asset financing is accounting for an average of 15 per cent of total interest income for banks. The industry believes potential to raise this figure exists, considering that most banks started giving asset financing more focus only in the last five years.More

Stanbic Bank
This is is a relatively new entrant in the asset financing market, having set up the department about four years ago. The company is financing 30 to 40 vehicles per month.

KCB
KCB’s recently launched Asset-Based Finance product allows customers to borrow from Sh1 million to purchase assets in a repayment period of 12 to 60 months. Borrowers are required to make a minimum deposit of 20 per cent of the value of new assets.

Asset based loans are perfect for:
-Company acquisitions and business mergers
-Management buy outs
-Financing expansion
-Turnaround finance
-Refinancing existing business loans

Why consider asset based financing for capital?
-Able to leverage sales growth today
-The lack of flexibility through regular bank financing is no longer an issue
-Revolving credit lines can be secured by your raw materials and finished goods inventory
-Access large amounts of cash that have already been invested in the infrastructure

]]> Tue, 25 Sep 2007 03:09:00 EDT http://Kip.tigblog.org/post/319945 -1.2833333 36.8166667-1.283333336.8166667 Over The Counter Market Needed at NSE http://Kip.tigblog.org/post/319947
Over-the-counter (OTC) trading
This is to trade financial instruments such as stocks, bonds,commodities, or derivatives directly between two parties. It is the opposite of exchange trading which occurs on futurews exchanges or stock exchanges.An over-the-counter contract is a bilateral contract in which two parties agree on how a particular trade or agreement is to be settled in the future. For derivatives, these agreements are usually governed by an International Swaps and Derivatives Association agreement.An over-the-counter market is a financial market where products are traded over-the-counter.

Role of OTC
The over-the-counter market has taken on a huge dimension especially in the USA, because there it has given room for other often also high risk issuers to enter the market, something which would have been impossible for them on a bourse.

In general
The reason for which a stock is traded over-the-counter is usually because the company is small, making it unable to meet exchange listing requirements.
In Kenya this would ensure that many corporate entities that have often been shying away from listing at the bourse due to stringent listing requirements will have an opportunity to sell their shares for subscription by the public. This would enhance the number of options available to investors and eventually would enhance trade volumes, liquidity and widen the options available.

]]> Sat, 22 Sep 2007 05:09:00 EDT http://Kip.tigblog.org/post/319947 -1.2833333 36.8166667-1.283333336.8166667 Financial Markets Contagion http://Kip.tigblog.org/post/319949 Financial market
The financial market is an en elaborate markets that encompass the money market and the capital market. The money market facilitates short term borrowing whereas the capital markets provides for long term lending.

Financial market Interconnection
Advances in information and communication technology has seen many financial markets become interconnected and more often information released in one place will be replicated in other markets either positively or negatively depending on the nature. In Kenya, the regulators have been asked to be vigilant against the possibility of Kenya being affected by the financial crisis currently facing other parts of the world.

Financial contagion
Financial contagion refers to the phenomenon when one country's economy is negatively affected because of changes in the asset prices of another country's financial market.One particular example of this can be seen during the Asian financial crisis of the late 1990s. A more recent crisis where disruptions quickly spread into other areas of financial markets is the Subprime mortgage financial crisis in August 2007.

Subprime Virus
The subprime virus has gone global. Starting as a localised outbreak in the US market for risky subprime mortgages, it has spread into the supposedly safer markets and even into prime mortgages. Meanwhile, it has crossed into other loan species – particularly leveraged lending, where ballooning spreads have rattled the market and left banks holding big chunks of debt.

Effects
Those with bad leveraged bets face falling collateral values, tighter lending from prime brokers and illiquidity in some assets. That is probably exacerbated by investors seeking redemptions after two Bear Stearns funds blew up in June. That can force a fire sale of assets or a redemption freeze and more fear. more

Kenya financial market
Here in Kenya, although analysts concede the probability of contagion is low, the call is being made in view of the fact that foreign investors have increasingly been looking at the Kenya’s financial markets as a safer alternative to the developed and emerging markets where there has arisen a crisis resulting from failure of risky and poorly structured mortgage dubbed “sub-prime mortgages” market.The Central Bank of Kenya, Capital Markets Authority and the Nairobi Stock Exchange and Treasury are institutions that are in one way or another involved in monitoring of developments in the financial markets.

Emerging markets (EMs) Capital Markets
EMs far from the source of the initial shock can be victims though they are innocent bystanders. Because contagion is possible and likely for emerging markets the cost of capital market contagion could be major.

Big Q
The question is whether the contagion, which started in US housing, spreads back from financial markets into the real economy.

]]> Thu, 20 Sep 2007 10:09:00 EDT http://Kip.tigblog.org/post/319949 -1.2833333 36.8166667-1.283333336.8166667