[2008-06-11]  Safaricom dips as investors sell their stake
The refunds from the Safaricom IPO have the potential of causing fluctuations in the share price, but the options investors have are varied and it is impossible to tell how the share will perform over the long term.

June 11, 2008: Newly listed Safaricom shares fell at the stock market yesterday as foreign investors sent mixed signals over their interest.

The share moved from an average of KSH7.35 per share on Monday to KSH6.95 yesterday, deflating the expectations of retail investors, with bid prices tending below the closing price.

With interest from foreign investors key to the direction the share would take, it came as a damper that foreign investors exited the counter on average on Monday.

Of the KSH2.9 billion in turnover on the Safaricom counter on the first day, foreign investors sold shares worth KSH950 million and bought shares worth KSH372 million, a net withdrawal from the security.

On the same day, the foreign investors also made an exit from Equity Bank, Jubilee Insurance and Kenya Re as they bought into Access Kenya, Athi River Mining, CFC, CMC, EABL, ICDC KenGen, Kenya Airways, Mumias Sugar, NBK and NIC.

Yesterday the same trend continued with foreign investors buying only KSH35 million in Safaricom shares against sales of over KSH500 million, on a day that Eveready appeared to attract some foreign interest.

That turn of events has left analysts searching for answers with some questioning the calibre of the foreign investors who Safaricom attracted. Most analysts said foreign and institutional investors were taking their profits on the first day of trading as demand for the shares outstripped supply.

“The jump from KSH5 to KSH7.35 was an attractive price for the foreign investors,” said Joshua Muchiri, an Investment analyst at British American Asset Managers. Unlike retail investors who view gains in terms of nominal value, institutional investors consider the return on investment which at 50 percent on the first day was lucrative by global standards.

For foreign investors who had bought the shares at an indicative price of KSH5.50 per share, the after market represented a gain of over 30 percent. Brokers said the foreign investors were taking their profits in anticipation of a price fall.

Some brokers also indicated that the foreign investors were taking positions to re-enter the market at a lower price, as supply outstripped demand today in the absence of a bulk of the KSH96 billion in IPO refunds expected to reach the market next week.

“The refunds can alter the price direction for the market but the options open to investors are quite broad,” Mr. Muchiri says.

In a circular sent by the Capital Market Authority (CMA), stock brokers have been instructed not to allow the refund cheques to go directly into shares. Instead investors will deposit the cheques in their bank accounts.

“The selling price part of the shares at KSH7 was adequate to break even on costs,” he said. Some of the costs, investors were looking to offset included transaction fees and interest on the loans.

Yesterday bids for the shares appeared to pick momentarily as demand failed to match supply on the basis of price alone. This has stoked optimism that the shares are well positioned for the long term.

“It is a good share in terms of value and growth,” he said. “I expect the counter to pick up slowly during the rest of the week when a number of people take up positions,” said Chris Munene, a dealer at Bob Matthews.

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