[2008-06-25]  Safaricom entry ups the profile of stock market
In Capital Markets circles there’s general consensus that the entry of Safaricom into the Nairobi Stock Exchange will leave it fundamentally changed, even unrecognisable forever.

It was Monday, June 9, 2008, round about 10.30 am. The President rang the bell to officially launch the start of trading in shares of Safaricom at the floor of the NSE.

Within 10 minutes of trading, the all-time trading turnover record was broken. By the end of the day, some KSH3.38billion was traded, beating all known records. To put things in perspective, the entire market turnover for the year 2001 was shillings three billion.

What are the changes brought about by the listing of Safaricom and what major milestones does it mark?

Though it has been trading for a short time (only two weeks) the listing of Safaricom has clearly helped to mobilise a far greater level of new investment capital into the stock market than ever seen, either through redirecting from alternative investments, for example property, commercial bank deposits, or even trapping informal sector flows which have hitherto operated outside of the banking system.

Daily market turnovers which had averaged about KSH480million jumped to the true north of Sh1billion and over—a feat directly attributable to Safaricom listing.

The IPO also saw the entry of the highest number of new investors into the stock market through a single event. KenGen IPO introduced about 170,000 new investors into equities market, Safaricom has brought a staggering 800,000 new investors.

This helps to further raise the capital markets demand-side through increased participation by more Kenyans. It also acts as an agent of economic formalisation, complementing bank efforts of bringing the informal sector into the money economy.

Where banks have not been able to lure jua-kali savings, IPOs have succeeded in getting most of these people to invest.

Market capitalisation is scaling dizzying heights. Total market capitalisation at the best of times stood at about KSH800billion; with the arrival of Safaricom it has crossed the KSH1trillion mark, touching KSH1.28trillion (US$ 20billion), some 110 percent of GDP. This brings Kenya tantalisingly close to full emerging markets status.

Structural changes
There will be changes in the way brokerage business is conducted. Daily sale and buy orders now average 1,000 for a brokerage house, with customer queues, made worse now by the refund cheques, here to stay.

My friend Bett Kimutai, a brokerage IT systems guru, says unless systems are enhanced to accept and process web-based, pre-formatted email, and SMS orders seamlessly, brokerages daily operations could not cope.

A steady and tapering convergence between banking and capital markets started with banks being content to act as sub-agents to brokers during IPOs; moved to obtaining custodial licences as central depositary agents and qualified as direct agents in IPOs.

At Safaricom IPO, the entire banking system threw all caution to the wind and accepted IPO allocated shares as collateral for lending. By deploying their combined retail networks, banks distributed more than 50 percent of the local tranche of Safaricom IPO. One bank is said to have done almost 30 percent alone.

The banks provided a perfect liquidity management instrument albeit momentary. The stage is now set for the next installment of this episode.

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