[2008-06-04]  Safaricom refunds to fuel stock market
Investors holding on to blue chip shares at the Nairobi Stock Exchange (NSE) should expect them to appreciate in the second half of the year after most of the companies experienced a slump in the first five months. Seven of the 20 firms that make up the NSE 20 share index — a performance tracker — saw their prices drop in the volatile months, but analysts expect the share prices to pick up in the second half of the year buoyed by the refunds from the Safaricom IPO. “I expect a rally on the share prices once the Safaricom refunds are paid,” said Steve Thiga, a stock analyst at Bob Mathews. The refunds will be paid from June 9. This is expected to be good news to the high-net investors including insurance firms and pension schemes as most of them have seen their returns from equity market trail the inflation levels, a first since 2005. Treasury and advisers to the Safaricom offer deal are preparing refund cheques estimated at KSh187 billion after the offer raised KSh237 billion against a target of KSh50 billion. Of the KSh187 billion, institutional investors including insurance firms and pension schemes who prefer to put their money in the blue chip firms, expect refunds of about KSh35 billion. Mr. Thiga said the institutional investors look set to plough back a huge chunk of the refunds at the NSE with their focus trained on the blue chips. “The market is expecting high demand for shares for the high profile firms,” he added. Over the past five months, demand for the blue chip shares dropped to their lowest levels in what analysts attributed to the post-election turmoil, which gripped the country in the first quarter and commitments for the Safaricom. This saw the NSE 20 share index, which measures the price movement of blue chip firms high net investors prefer, marginally increase from 5175 points on May 29 compared to 5167 at the start of the year. This is an indicator that, in general, prices of the top 20 firms at the NSE have remained almost stagnant since the start of the year. Shares of the non-banking institutions that make up the index helped to drag down the index as all of them save for Nation Media Group and Bamburi Cement, posted a positive return over the past five months. Nation posted a return of 35 percent while Bamburi Cement saw a return of just two per cent. The rest including Kenya Airways, Sameer Africa, KenGen and Unilever Tea posted double digit negative return with Kenya Airways leading the pack with a negative return of 43 percent. But the banking institutions led by Equity Bank, which dished a return of 160 percent, posted what analysts attributed to record profits witnessed in the sector in the first quarter. Brokers say the index could reach the 6000-point mark by the end of the year. Market capitalisation improved to KSh917 billion in May compared to KSh810 billion in January.


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