I have been in the Kenyan shares investment industry for a number of years within which I witnessed some investors gain immensely, others loose and some maintain a stagnant value. Stock markets the world over offer investors a chance to grow their funds, but also expose investors to some level of risk.
The recent roll-out of IPOs on the Exchange and the current bull run have left investors, new to the market, blindly believing that IPOs are a sure rip, and the market is perpetually on a bullish trend. Kengen and Scangroup IPOs were both a whooping success with both of them being grossly oversubscribed, and Kengen’s price more than tripling on its entry into the market. Equity Bank’s introduction into the market saw the price more than double on its initial trading day.
While the Stock market may look like an easy place to make money, this is not necessarily always the case. There is a need for level-headedness and a lot of caution on the Stock Exchange dealings and investors, especially those new to the market need to put the following pointers at hand when going into this investment sea.
Reward and Risk
An investor who purchased a modest 1,000 Kenya Airways shares at the beginning of years 2005 parted with approximately Kshs. 20,000. 1 year down the line, this investor is worth approximately Kshs. 115,000, translate to a 575% capital gain over a single year. An E.A. Cables share-holder would have a much better story to tell, especially if the shares were purchased as recently as last year when the share traded at a low of Kshs. 65. The company has captured an unbridled shares price appreciation since the 10 to 1 shares split announcement. Currently trading at Kshs. 103, translating to Kshs. 1,030 before the split, this shares-holder would thus be boasting of a crazy 1485% profit.
The story is not the same however for any Uchumi Supermarket share holder. The suspension of this formally quite active stock on the NSE resulted in the sinking of millions of investors funds. The market has an investor compensation fund that mitigates against market related risks such as the folding up of a brokerage company. Uchumi’s suspension however falls under Industry risk which is completely bore by the investor.
Investors thus need to appreciate the two side of the investment coin and bear this in mind as they commence this investment journey.
Market Correction
The market always experiences a market correction after a bullish run as investors lock in on capital gains or prices reaches uncomfortable levels.
Market prices are swayed by the supply/demand balance, and a Bull Run results from an overweight on the demand side. A point reaches however where shareholders, especially those who may have bought the shares at a much lower price, want to cash in on the gains, thus increasing supply in the market. The price may also shoot to levels where investors feel is too high to purchase and pull out, thus reducing demand for the share. This usually causes a turnaround on the share price trend to a decline.
Price Turnaround Points
All investors get into the market with the hope of buying share at their lowest point and selling at the highest point of a possible bull cycle. It is however completely impossible to tell at what point a price trend will turn around from decline to appreciation and vice versa. These points are the hardest to hit and no analyst can tell with complete certainty at what point a price will bottom out for perfect purchase, or hit the roof for a perfect sale. Managing to hit these points is pure luck, and waiting to hit these points can be disappointing.
MARKET REVIEW
The bourse captured a general price appreciation across the board as it marked the first day of trading under the Automated Trading System (ATS). 80% of the listed companies captured activity out of which 61% registered appreciation and 39% edged lower.
Agriculturals saw Rea Vipingo and Sasini close slightly higher at Kshs. 24 and 40.75 respectively. All active counters on the commercial and services captured improved prices. CMC Holdings broke the Kshs. 100 barrier to average Kshs. 103 while TPS broke its declining trend to close Kshs. 8 higher at Kshs. 100. Scangroup moved 540,500 shares at an average of Kshs. 26, while Kenya Airways and Nation Media both closed a shilling higher at 115 and 208 respectively.
Financials were all up except KCB and Standard Chartered both of which maintained their Friday’s average price of Kshs. 180 and 158 in that order. Equity Bank and CFC Bank were the sectors highest climbers as Equity shot up Kshs. 11 higher to close at Kshs. 122 while CFC was up Kshs. 8 to average Kshs. 88.
Industrials had mixed performance with a larger number of losers. The cement industry captured the day as Bamburi cement moved 5,000 shares Kshs. 12 higher at Kshs. 190 while E.A. Portland closed 9 higher at Kshs. 139.
The recent roll-out of IPOs on the Exchange and the current bull run have left investors, new to the market, blindly believing that IPOs are a sure rip, and the market is perpetually on a bullish trend. Kengen and Scangroup IPOs were both a whooping success with both of them being grossly oversubscribed, and Kengen’s price more than tripling on its entry into the market. Equity Bank’s introduction into the market saw the price more than double on its initial trading day.
While the Stock market may look like an easy place to make money, this is not necessarily always the case. There is a need for level-headedness and a lot of caution on the Stock Exchange dealings and investors, especially those new to the market need to put the following pointers at hand when going into this investment sea.
Reward and Risk
An investor who purchased a modest 1,000 Kenya Airways shares at the beginning of years 2005 parted with approximately Kshs. 20,000. 1 year down the line, this investor is worth approximately Kshs. 115,000, translate to a 575% capital gain over a single year. An E.A. Cables share-holder would have a much better story to tell, especially if the shares were purchased as recently as last year when the share traded at a low of Kshs. 65. The company has captured an unbridled shares price appreciation since the 10 to 1 shares split announcement. Currently trading at Kshs. 103, translating to Kshs. 1,030 before the split, this shares-holder would thus be boasting of a crazy 1485% profit.
The story is not the same however for any Uchumi Supermarket share holder. The suspension of this formally quite active stock on the NSE resulted in the sinking of millions of investors funds. The market has an investor compensation fund that mitigates against market related risks such as the folding up of a brokerage company. Uchumi’s suspension however falls under Industry risk which is completely bore by the investor.
Investors thus need to appreciate the two side of the investment coin and bear this in mind as they commence this investment journey.
Market Correction
The market always experiences a market correction after a bullish run as investors lock in on capital gains or prices reaches uncomfortable levels.
Market prices are swayed by the supply/demand balance, and a Bull Run results from an overweight on the demand side. A point reaches however where shareholders, especially those who may have bought the shares at a much lower price, want to cash in on the gains, thus increasing supply in the market. The price may also shoot to levels where investors feel is too high to purchase and pull out, thus reducing demand for the share. This usually causes a turnaround on the share price trend to a decline.
Price Turnaround Points
All investors get into the market with the hope of buying share at their lowest point and selling at the highest point of a possible bull cycle. It is however completely impossible to tell at what point a price trend will turn around from decline to appreciation and vice versa. These points are the hardest to hit and no analyst can tell with complete certainty at what point a price will bottom out for perfect purchase, or hit the roof for a perfect sale. Managing to hit these points is pure luck, and waiting to hit these points can be disappointing.
MARKET REVIEW
The bourse captured a general price appreciation across the board as it marked the first day of trading under the Automated Trading System (ATS). 80% of the listed companies captured activity out of which 61% registered appreciation and 39% edged lower.
Agriculturals saw Rea Vipingo and Sasini close slightly higher at Kshs. 24 and 40.75 respectively. All active counters on the commercial and services captured improved prices. CMC Holdings broke the Kshs. 100 barrier to average Kshs. 103 while TPS broke its declining trend to close Kshs. 8 higher at Kshs. 100. Scangroup moved 540,500 shares at an average of Kshs. 26, while Kenya Airways and Nation Media both closed a shilling higher at 115 and 208 respectively.
Financials were all up except KCB and Standard Chartered both of which maintained their Friday’s average price of Kshs. 180 and 158 in that order. Equity Bank and CFC Bank were the sectors highest climbers as Equity shot up Kshs. 11 higher to close at Kshs. 122 while CFC was up Kshs. 8 to average Kshs. 88.
Industrials had mixed performance with a larger number of losers. The cement industry captured the day as Bamburi cement moved 5,000 shares Kshs. 12 higher at Kshs. 190 while E.A. Portland closed 9 higher at Kshs. 139.
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