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Kenyan blue-chip stocks noticeably down: hurting investors

NAIROBI (Xinhua) -- A majority of Kenyan stocks are on a downward spiral as several companies in various sectors continue to record depressed earnings while others are haunted by corporate governance challenges.

From insurance, transport, energy, agriculture to housing sectors, the stocks are coming down disheartening a majority of investors, some who had bought the shares to sell when they rise.

Out of the 64 companies trading at the Nairobi Securities Exchange (NSE), five are trading below one shilling (0.01 U.S. dollars) while over 20 others are below 0.10 dollars, an analysis of the market records show.

Authorities at the NSE have further suspended four companies from the bourse and delisted one last week due to corporate governance challenges.

Among the worst hit sectors is insurance, which has six listed firms at the bourse namely Britam, Corporate Insurance Company (CIC), Jubilee, Kenya Re, Liberty and Sanlam.

The insurance industry’s bottom lines declined in 2018, weighed down by the increase in net claims and benefits and depressed investment incomes.

Most insurance companies have invested in government securities and the real estate.

However, yields on government securities fell to an average of 7- 9 percent from 9-13 percent in 2018 and there were subdued returns from a tight real estate market.

"The growth in the insurance industry in Kenya is still underpinned by underinsurance and low insurance uptake.

"Insurance penetration in Kenya stands at 2.6 percent," notes investment firm AIB Capital.

On Monday, Britam traded at 0.08 dollars, CIC 0.03 dollars, Kenya Re 0.10 dollars while Liberty 0.09 dollars, all which are lower than the prices they started trading at the NSE.

In the energy sector, Kenya Power and KenGen initially seen as the best blue-chip stocks at the market are currently trading at lower than the initial public offering price, with the former trading at 0.04 dollars and the latter 0.06 dollars.

Kenya Airways, in the transport sector, is among the worst performing stocks as the company continues to chalk up losses.

On Tuesday, the company announced a loss of 750 million dollars as it trades at 0.04 dollars.

"I bought several shares while still working in a government parastatal nearly 20 years ago as an accountant and I have not sold them hoping to cash in but today if I sell them, I would make huge losses despite the passage of time since prices have declined," said retiree Boniface Mango on Tuesday.

The stock market used to be a good investment place, now it is not the best, Mango said.

Investors’ wealth, measured by market capitalization, on Tuesday stood at 23 billion dollars, down from a high of 29 billion dollars in April last year.

A number of stocks have seen their value decline by up to 90 percent, eroding the market capitalization.

The stock market took its worst beating in the second half of 2018 after most foreign investors exited the market.

The foreign investors account for up to 80 percent of trading at the bourse, therefore, their withdrawal affects the market as demand for shares declines, pushing down prices.

The investors, according to analysts, are also sensitive to poor financial postings and corporate governance issues.

The worst hit when prices of shares fall are the small investors, who tend to buy to hold hoping to sell later and have little information about the day-to-day performance of the stocks.

It is this kind of investors who are currently disillusioned by the market, noted Ernest Manuyo, a business lecturer at Pioneer Institute.



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