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Kenyans shun NSE as cost of living escalates

In Summary

• Wages have stagnated but the cost of living and taxation continues to soar. People have nothing left to save or invest.

An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE
An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE

Lack of disposable income occasioned by the high cost of leaving has led to a decline in the number of Kenyans investing at the Nairobi Securities exchange.

Latest data from the  Capital Markets Authority, shows that  the number of new investors at the bourse has dropped by almost half.

According to Capital Markets Authority (CMA) Q1 2019  Statistical Bulletin, an average of 16,855 new Central Depository Statement Corporation accounts (CDSC) were opened between 2016 and 2018 compared to 32,684 in same period between 2011 and 2015,  a 48 per cent drop.

However, a total of 3,963 new accounts were opened in the quarter under review compared to a total of 3,611 new accounts opened in Q4 2018, reflecting a 9.75 per cent increase.

Foreign investors were the net buyers between 2012-2016 with an average inflow of Sh 11.5 billion. The trend however changed in 2017 and 2018 with a rise in net outflow to Sh11.58 billion and Sh22.966 bilion respectively. 

Apart from limited disposable income, CMA further attributes the low level of domestic investors at the bourse to high yields in other investment portfolios and a tough business environment that has seen listed firms incur losses.

The options sought are assets with long term returns like real estate and land or stable ones like government papers.  

Financial risk management and investment expert Mihr Thakar is blaming the poor investment and saving culture to tough economy times 

‘’Wages have stagnated but the cost of living and taxation continues to soar. People have nothing left to save or invest,’’ said Thakar. 

He also attributed Kenyans’ low interest in NSE on its poor performance that saw it close the year with a market capitalisation of Sh2.1 trillion, a 15.9 per cent drop from Sh2.5 trillion in 2017 as majority of the stocks shed value.

 

The NSE 20 has decreased 28 points or 0.98 per cent since the beginning of 2019, according to trading on a contract for difference (CFD) that tracks this benchmark index from Kenya.

According to Thakar the failure of companies such as Athi River Cement, Mumias Sugar Company and Kenya Airways has added to the apathy. 

The Kenya Stock Market (NSE20) reached an all time high of 5499.64 in March of 2015 and a record low of 2749.34 in October of 2018.

The 2019 Finacess Household Survey released early last month shows that 51 per cent of Kenyans are living hand to mouth.

This has further eroded the country’s saving culture, lagging behind other economies in the continent.

According to World Bank, Kenya had a higher saving culture than Senegal, Ghana, Uganda, but has stagnated in the last three decades, allowing the rest to catch up and surpass it.

Kenya’s gross domestic savings as a percentage of GDP fell to  10.3 per cent last year from 11.2 per cent in 2017  as the rising cost of living ate into cash set aside for a rainy day.