Dwindling trade in shares at the Nairobi Securities Exchange more than halved its net earnings in the first half of the year according to a financial statement published yesterday.
The self-listing company's net earnings dropped 54.1 per cent to Sh81.96 million from Sh178.58 million in the same period last year, the NSE said, citing slowing foreign and domestic investor appetite.
The equity turnover for the bourse – largely driven by foreign investors – dipped by about Sh66 billion to Sh147 billion, cutting its total revenues by 16.66 per cent to Sh334.30 million.
"China’s slowdown combined with a dip in commodity prices, sinking sovereign bond yields and widespread investor anxiety continued to dim the economic prospects for both emerging and frontier economies,” chief executive Geoffrey Odundo said in a statement. “The Nairobi Securities Exchange performance in H1(first half of 2016) has been a reflection of these dynamics.”
The NSE 20-Share Index – which captures the performance of 20 best blue-chip firms and generally reflects the true picture of the bourse – consequently declined by 9.15 per cent to 3,640.61 points compared to a year ago.
“The period witnessed reduced equity trading volumes from foreign investors as well as subdued activity from local retail and institutional investors,” Odundo said.
Earnings from the 0.3 per cent equity transactions levy decreased 30.9 per cent to Sh176.7 million from Sh255.7 million in six months to June 2015.
“The bourse has remained on a nosedive, with the banking sector dragging the market index,” analysts at African-focused financial advisory firm, StratLink, said in their August report, citing concerns around non-performing loans. “This is likely to be stoking uncertainty amongst investors, prompting them to take a cautious stand on the sector.”
Commissions from bond transactions, dominated by the government as issuer for budgetary support, however, increased by 39.39 per cent to Sh18.4 million compared with June 2015.
The NSE's net income was further wiped out by a 15.87 per cent rise in administrative expenses to Sh235.8 million on investment in new projects to diversify revenue streams.
“The group remains focused on broadening its product offerings which will include the Derivatives market and Exchange Traded Funds,” Odundo said.
The NSE got licence for financial derivatives which enable dealers in shares and currencies to enter into binding contracts for buying or selling the units at a specified price and time in future, but little capacity has hindered its launch.
Rules for Exchange Traded Funds – vehicles which enable investors to pool cash buy into a diverse number of stocks and bonds – were issued in October 2015, but roll out has also been held back by inadequate knowledge among participants.