What happened to the hype among retail investors at the Nairobi Securities Exchange (NSE)? Over the past five or so years, the stock market has remained relatively silent, left mostly to institutional investors and high-networth individuals.
Clearly, the thousands of retail investors swept to the NSE by the wave of IPOs such as KenGen and Safaricom have either drowned or have been deposited ashore. Most small investors who bought shares for between Sh10,000 and up to Sh1 million have exited the market.
They realised that stocks are not for the faint-hearted. Also, they may have learnt to their sorrow that when it comes to investing in shares, patience is a virtue. It’s not a get-rich-quick scheme.
As the stock marketed oscillated, sometimes rolling up and the next minute tumbling, it became too hard and unpredictable for the investor without the skills to play the market and stomach churn of events.
The safest option was to exit the market – whether at a loss or profit did not really matter. With a market taken hostage by cartels of very shrewd speculators who can push up the price of a stock in a matter of hours or even devalue a bluechip share in a short time, the NSE is a jungle where small-time punters are often eaten up by the big game.
It’s not fair that the average Kenyan is being locked out of a market that has majority local listed companies, whose products they consume almost on a daily basis. Many ordinary Kenyans would love to have a piece of Safaricom, Kenya Power, KenGen, Unga Group, Kenya Airways, Mumias Sugar and KenolKobil, among others. But market dynamics make it prohibitive.
The Capital Markets Authority and NSE should step in and streamline market operations to tame speculative forces – fueled insider trading – that prey on innocent investors. Without profitable moments, most stock investors step out of the game.
In addition, some share prices are too high for retail investors to buy any considerable amount. The regulators should push for more share splitting to bring down the value and make them more affordable to retail investors. That would also help get these counters more active, a great thing for the market too. Regulators should also step up their awareness campaigns on investing at the NSE.
Since the IPO pipeline dried up, we hear less from these two bodies unless they are making some corporate statements or getting into partnerships. The generation that invested in the KenGen, Safaricom, Scangroup, AccessKenya and even Eveready, have had their time on the dance floor.
We need to recruit the new set of investors who have been maturing over this period to have a taste of stocks. The old boring institutional investors who always take long-term positions and speculators won’t take the market far. We need a mix of different players, including the small guys on the street. The writer is the managing editor of Business Today (www.businesstoday.co.ke). [email protected]