The persistent bear run on the Nairobi Securities Exchange (NSE) has seen three companies, including Credit Bank, suspend plans to list on the bourse, fearing an adverse pricing of their shares.
Most stocks listed on the NSE including those of blue-chip firms like Safaricom, KCB Group and East African Breweries Plc (EABL) have declined significantly due to multiple factors including foreign investor flight.
Companies usually prefer to go public in a bull market which allows them to sell shares at a premium valuation and enjoy a stable or rising paper wealth for their shareholders once they list.
The Capital Markets Authority (CMA) disclosed in an interview that Credit Bank together with other two unnamed companies from the food processing and mining sectors have halted their planned listing.
“We know at least three companies which were preparing to come to the market have postponed and they said that they wanted more time. Most of them have just looked at the conditions and said we would wait. The values of most of the listed securities have gone down,” CMA chief executive Wycliffe Shamiah said.
“What is affecting the private sector is now the cost of listing, taxation and then the environment where people feel perhaps you will not know what will happen tomorrow.”
Credit Bank’s listing on the main segment of the NSE was expected to bring to an end the listing drought that has engulfed the exchange since July 2014 when the bourse operator self-listed.
The lender which is 27.1 percent owned by the family of the late politician Simeon Nyachae (through Sansora Group of Companies) had announced plans to raise at least Ksh1 billion from the public.
It had earlier sold a 20 percent stake to Mauritius-based private equity fund Shorecap for an undisclosed sum. It made the announcement on the proposed listing in August.
Credit Bank says it still plans to push ahead with the listing.
“Credit Bank is committed to listing at the NSE. At the moment, the bank shareholders are in consultation with all the relevant market players including regulators, the investing public and shareholders to make the listing a success,” said Betty Korir, the bank’s managing director.
Currently, there are 57 listed firms after five and four firms were delisted and suspended, respectively. Property fund Ilam Fahari I-Reit is also set to be delisted after its owners voted to approve the market exit.
The NSE is going through a bear run which started strongly in 2015, with multiple factors blamed on the downward trend of share prices.
Analysts say the depreciation of the shilling and lack of dollars are now the biggest hindrance to reversing the bear run.
“I think the bigger issue is the currency and not even the politics. The depreciating currency and the unavailability of dollars are a big issue to foreign investors,” said Paul Mwai, NSE vice chairman and chief executive of AIB-AXIS Capital Ltd.
The market value of all stocks listed on the NSE declined by 10.72 percent to Ksh1.48 trillion ($9.67 billion) in the three months to September 30 from Ksh1.66 trillion ($10.84 billion) in the previous quarter (April-June).
The NSE 20 Share index and NSE All Share Index (NASI) fell by 4.2 percent and 11.01 percent to 1,508.75 and 95.22 percent respectively during the period under review.