Some years ago, stock-brokering was one of the most lucrative businesses in Kenya, with dozens of individuals and corporates setting up firms to cash in on demand for the services.
Banks and insurance companies are among the entities that established stock brokerage divisions as hundreds of people sought to invest at the Nairobi Securities Exchange (NSE).
The tide has, however, changed in the east African nation following a lengthy bear run that has hit the NSE.
The bear run that has persisted for years has eroded stock prices, keeping investors away as stockbrokers soak losses.
A number of stocks currently at the Kenyan bourse, including Home Afrika and Eveready, are worth a shilling (about 0.001 U.S. dollars) or less while others like Athi River Mining Cement and Mumias Sugar have been suspended due to corporate governance issues.
The latter has not helped to restore confidence in the market that has also been hit by some global issues.
An analysis of the latest half-year financial results of several stock brokerage firms paint a grim picture for the companies, as they registered depressed trading for over four years in a row, which affected their earnings.
ABC Capital, one of the leading brokerage firms in Kenya, made a loss of 55,882 dollars in the first half of the year, with the loss rising from 52,000 dollars in the previous period.
The earnings were affected by depressed commissions from sale of stocks, which is the biggest source of income for the brokers.
Similarly, Genghis Capital saw its brokerage commission fall from 867,647 dollars in June 2018 to 735,294 million at the end of June.
Things were not any different for African Alliance Kenya Investment Bank which had its brokerage commission during the period halve to 421,568 dollars while Kestrel Capital posted a huge decline in earnings from 2.9 million dollars to 930,392 dollars, topping the list of one of the worst-hit.
Analysts noted that with the persistent bear run at the bourse, stockbrokers would continue to count losses.
“It is certain that stockbrokers must diversify their sources of income or perish. I don’t think the current status of the market will inspire confidence in investors to make them buy stocks,” said Ernest Manuyo, a business lecturer at Pioneer Institute in Nairobi.
He noted that the suspension of various stocks from the bourse and declined prices of the remaining ones have affected negatively the market.
“The other day some 130,000 shares of the stock were traded only for it to be suspended from the bourse few hours later. Such actions leave even bold investors jittery,” he said, adding the debt market has become a better investment option for individuals and institutions.
Cytonn, a Nairobi based investment firm, noted that most of the traders at the stock market are foreigners thus are influenced by what is happening in the global markets.
On Friday, the NSE 20 Share Index closed at 2,435.92, a decline of 4 points from the previous session while market capitalization, which measures investors’ wealth, went down 0.2 percent to close at 21 billion dollars, with no sign that the bear run will end soon. Enditem