Wednesday, August 16, 2006

Mid week Business

Insider Trading
The CMA has announced an investigation into the dramatic price rise of EA Cables in the last two weeks. I understand the price gains since the stock split was announced but what the CMA should really look at are the price surges before the split was announced, and which took place on very thin volumes traded.

Jaindi Kisero, editor of the East African, explains how a stockbroker can manipulate the price of a stock upwards through "transactions done across the books - where two nominee accounts belonging to the same broker outbid each other and move the price to the level they have predetermined in their office away from the scrutiny of other players". Maybe the result would look like this. EA Cables is likely to be innocent but brokers are not being candid about their nominee account dealings. The may also be a factor behind the steep day one price surges of Kengen and Equity Bank.

Banking Changes
- Bank merger: EABS Bank is seeking a merger with another bank to propel it into the top 10 of Kenyan banks. It was formed by a merger of East African Building Society and Akiba Bank in 2005. from East African.
- CFC has cut back its Saturday banking hours to a more conventional 9a.m. to noon. It appears that longer hours don’t mean longer profits and such banking may be better left to ATM’s which are 24-hours. The pioneer of longer hours was NIC’s MOVE.
- NBK has linked its ATM’s with Pesa Point.

City vs. Justice
On Monday morning, the parking lot at the Law Courts operated by the Nairobi City Council had been fenced and had signs proclaiming the parking as the site of a new courthouse and police post. But within an hour, staff from the city council had demolished the mabati fence and resumed normal parking activities.

Airlines
- New look KQ: Kenya Airways has advertised for the design of new uniforms and interior design of aircraft. Details at www.kenya-airways.com and deadline is September 30.
- Went to JKIA on Sunday Afternoon. The local terminal was clearly overcrowded with jets having nowhere to park and passengers had to walk past several other aircraft as there are no walkways. The airport authorities have scrapped plans to utilise the old (Embakasi) airport but something needs to be done soon. I remember arriving at Mumbai and being driven in a taxi out of the airport at 2.a.m. to the local terminal for a connecting flight, which was a bit scary for a first visit to India.
- African time If you get bumped by KQ as often happens these days it’s because the airline typically has about 5% no shows and so adjust their booking to ensure that there are no empty seats on flights. Sometimes everyone shows up hence someone has to get bumped.

Standard goes main
In January shares of the Standard Group will move from the alternative board to the main listing board at the NSE.

Absurd quote
A shortage of baby diapers in Nairobi is to being blamed on the Lebanon-Israel war in the Middle East.

Jobs

Chief financial officer at the Aga Khan Hospital Mombasa. Apply to hr@msa.akhskenya.org by August 25.

Programme officer at the Forum for African Women Educationalists (FAWE)> Apply through Deloitte at esd@deloitte.co.ke

NGO Council: Deputy director finance & administration, finance manager, legal officer, IT operator, Project officer, and other vacancies. Deadline is August 25.

Africa region director at the American Red Cross. check www.redcross.org/jobs for derails

Standard Group
Apply to the Head of HR
- Senior accountant (Treasury) D/L is August 18
- Sales executives. D/L is 26 August
- Regional sales & distribution managers. D/L is 30August

World Bank: The deadline for applications to the WB Young Professionals Program is August 31.

24 comments:

Riba Capital said...

EA Cables .. Guys there is conflict of interest here;
Consider this: Major Shareholder via Transcentury 75.62%, Stockbroker - Sells/Buys Stocks, Investment Banker - Market Maker, Chairman of NSE - Oversees trading and provides platform and Politician..

What else do you expect. Am not against Jimnah Mbaru, the guy has earned all these titles but for the sake of our Financial Markets Autonomy, this should not be the case.

Check out more on EA Cables and Standard Group @ Ribacapital.blogspot.com

Odegle Nyang Investments said...

I complained about lack of action from CMA in my blog www.odeglenyanginv.blogspot.com only yesterday. for me things are not adding up and i still feel the CMA probe is just a laundering exercise

Half 'n' half said...

I will skip all the business issues and ask, what does the middle east war have to do with diapers? I thought its because they are zero rated so they are cheaper

Riba Capital said...

Half n Half; Good Question, the answer is nothing because Just like daipers being zero-rated, most arab countries dont pay tax, actually even in Somalia guys dont pay tax and a good local example is Eastleigh where business is 'zero rated' or is it that they enjoy 'Diplomatic Status'?

Anonymous said...

Skwota>
Banks i beg to differ with what Kisero wrote in that it is impossible to outbid himself on shares so as to
financially sound, has good management as well as high growth potential. i think the fundamentals of the company are in check and the current premium investors are paying is due to anticipated future earnings the company is going tp make.

Lets not victimize Mr. Mbaru he has done nothing wrong neither has the stock market, its just that we are going through a similar thing that we went through during Kengen, there is alot of money lying around in this market, we have more informed investors who are aggressive as well as risk takers (read Uchumi).

People are not looking at E.A. Cables as trading at Kshs. 607 or 595 they are looking at it as Kshs 60.70 or 59.50. Trust me a number of those Cables haters out there will be buying this stock for KShs 100 after the split.

coldtusker said...

Aug 16 2006 (Wednesday) The Nation Online edition

Jaindi Kisero writes "Take the case of Kenol, which announced that it was splitting each share into 10 shares in the year 2004. At the time this was being effected, the market price of the stock was Sh450.

Consequently and following the split, the share commenced trading at the bourse at a price of Sh45.

One year later, the price of the share had surged upwards and was now was hovering at around Sh100, effectively meaning that the price had risen to Sh900 if you factor out the share split.

Then there is the case of the East Africa Breweries Ltd, which split its share by 10 at a time when the stock was trading at a level of around Sh500.
In a matter of months, the share price had reached Sh130, around which it continues to hover today."



Kenol had a 10:1 share split thus a shareholder who had 1 pre-split share ended up with 10 post-split shares. therefore Jaindi Kisero is WRONG when he equate the "pre-split vale at 900/- instead of 1,000/-. Elementary arithmetic my dear jaindi!

In EABL's case the error is even more egregious since EABL had a 1:5 bonus i.e. 1 "additional" share for every 5 held then a 5:1 split. Jaindi had it as a 10:1 split!

Please do you research I beseech you!

kenyanentrepreneur said...

Bankekele:

The brokers can do that. It is not illegal and it is not fraud for them to sell shares and then buy them back.

and to everyone else on this board: unless you have an inside source within the company, you will never really be able to accurately figure out it's "fundamentals"

Also, the business writing in the nation and standard is horrific.

propaganda said...

Anonymous: I agree with Jaindi about people's vulnerability to 'affordable' overvalued stocks created by splits. Jaindi's point is that the premium people are paying has balooned up out of all proportion to the company's real prospects. And that it should worry us that one broker, performing transactions in-house, is driving that premium. If the trades were between 'independent' stockbrokers, it wouldn't stink as much.

My stand is that even if the price isn't being manipulated, it's unjustified.

No value is created in a split. Buying in now -- when the stock is clearly overvalued by all traditional measures* -- is speculating, not investing. Let's be honest: "anticipated earnings" stopped being a factor in EA Cables price a while ago. We buy because we think we can sell to a bigger fool** before the whole thing price corrects itself. Which is either brilliantly risky or stupidly risky depending on how you make out.

*Does anyone look at audited accounts and calculate ratios any more? When people start telling you to ignore traditional measures of share value, a bubble is in the making.

**There's a saying about equity markets: If you can't see the fool in the market, then you are the fool.

Anonymous said...

for the sakeof this market the gvt needs to do a coupel of major IPO's there too much money chaisng too few shares - we need a safaricom, or kenya pipeline or even celtel

coldtusker said...

Where did you get the diapers quote? Who was the quoter?

Why can't we make diapers locally?

Most in my generation grew up diaperless... I think we turned out OK...

Kaku said...

I agree with Riba,there is conflict on interest here.The Board of directors of E.A.C were also a bit too fast in their stock split decision.I saw it coming but was giving it another 5 months or also and i guess this is the reason why there's insider trading or whatever is happening to push the share up.

For the diaper quote...may be it was just a comic relief by whoever who posted it,i see no relationship!

Nelie said...

To Coldtusker on diapers vs nappies
Not that I have inspected many behinds but a theory that was put to me -- many people of our generation (nappy generation) have darker butts than the rest of their bodies cause they suffer some serious urine burns!
So there, buy the baby some diapers!!!

Nelie said...

That should have been - suffered some serious urine burns in nappies as babies.

bankelele said...

Riba: He has significant holdings in so many companies - HFCK, KCB etc I hope he's not actively managing his portfolio. Kenya has not yet embraced conflict of interest managament, except court Judges.

Odegle Nyang: Karibu

Half 'n' half: I think it has to do with shipping lanes

Riba: Eastleigh is a duty free zone. Ask KRA

Skwota: This has nothing to do with fundamentals. I like Cables, the MD, the whole company (http://bankelele.blogspot.com/2005/04/ea-cables-agm.html) is innocent of broker machincations

Coldtusker: Suprising blunder from a very good editor.

Kenyanentrepreneur: We must admit that the practice is not illegal, but wrong. Even CMA is now reviewing its rules.

Propaganda: Nice quote, and I hope I am not the fool for sitting out

Anonymous: More IPO's coming

Coldtusker: Overheard as store clerk who explained it to annoyed shopper who had been to all the supermarkets. No local diapers it seems, they come from Egypt and Mid-East

Kaku: I think directors are innocent here

Nelie: no comment

propaganda said...

Banks: It's better to be a fool for staying out of a speculative mania than to be a fool for getting in. People laughed at Warren Buffet for staying out of overvalued Internet stocks. But he did just fine, unlike many who failed to find their bigger fool before the dotcom crash.

The quote is from Devil Take the Hindmost: A History of Financial Speculation (Found it at Book Villa! Thanks). The book makes one other interesting point: having information and brains won't protect you from being the fool in the market. Only controlling your greed will.

Anonymous said...

drawn here by the paypal link , well blogger tends to have limited functionalitied when it comes to such issues - why not register a bankelele.co.ke and move to alternate opensource apps like wordpress or even something like MT where you can have control over your content ?

Alibaba$tocks said...

Genuine & speculative investors are all exposed to inordinate risks at NSE currently.

Considering where Kenyans both economically and politically are coming from is not hard to explain the current explosive scenario. We had been deprived the luxuries of well to do & now thinks this is it, why not try out the new venture!

Money was scarce borrowed or savings and with the mart awash with personal loans, investment avenues seem ltd to ripe grapevine of overnight millionaires at NSE.

Access to news & unfiltered financial advice all about anywhere find solace in eargerly waiting accomodative kenyans. As much of greed & corruption had/has an upper hand chances of minting $ can't escape our short-cuts to nirvana.

Contrally to Kisiero investment avenues abound but the drive to cheap & easy money consume our appetite to research and engaging our minds.

As much as the stakes are high, be driven by reason and not the heart. Stock marts are not for the faint hearted. Disemberk if u smell a rat.

gathinga said...

funny how these guys have his cake and eats it.I think the chairman of nse ought to be somebody other than a broker or a direct beneficiary of stock broking. This we would avoid the thing 'nyani haoni kundule'. clearly conflict interest issues,even thoug within the law, arise. Our laws then are the problem

Anonymous said...

the NSE needs compettion, the JSE should come and start a rival exchange

mwasjd said...

let's just accept that it's kind of hard to get a level playing field at the stock mart.

Listening to Mbaru yesterday on NTV spotlight, he's all pro NSE having done no wrong. As in sticking to the law book, you can't pin down anyone as having manipulated the market.

I guess we are currently stuck in speculation as being the main driver of the market and not fundamentals. My take is learn the 'rules' and make the most out of it, risk not withstanding.

I thought equities were meant to be high risk, high return. Are people just jealous coz they didn't buy EAC stock when it was peanuts 3 years ago? The people who aren't complaining are those who are making a killing, so we shouldn't be faulted for making a good choice/guess...

bankelele said...

propaganda: Maybe it's time to cash in and return later

Anonymous: gimmie time

Alibaba$tocks: NSE has become the latest get-rich short cut joining kingscripts, goldbiz etc.

gathinga: it's evident the laws are weak

mwasjd: Mbaru has invested so much, not just financialy, in the NSE he has to defend it. He literaly created it and is acknnowledged consultant called on by other African stock marts because of his NSE work

RE NTV interview
what he said:
- Transcentury has not sold any Cables stock
- investors get poor advice
- EAP Cement is poorly run

what he restrained himself from saying
- some stockbrokers are crap or unqualified
- if you don't understand the markets, you have no business being here
- EAPC shoudl be on the alternative board

coldtusker said...

Nelie - Since you are a biz journalist... what say you to the comments by jaindi kisero on splits (see earlier comment)?

Also check out www.coldtusker.blogspot.com for another major goof up! Leave your comments on the blog if you feel I have been harsh!

coldtusker said...

@banks -

mbaru didn't create the exchange. It was up & running albeit at a leisurely pace. He bought Dyer & Blair from KCB after jimba credit collapsed!

acknnowledged consultant called on by other African stock marts because of his NSE work

I am not sure if that is really the case or its his spinmeister! jimnah & kirubi are good spinmeisters!

I do agree he has done well for himself... for that hats off to him! I think he was the first broker to create a "corporate" image. Thereafter, John Munge did so with Shah Munge. All the others had lousy cramped offices! I remember Francis Drummond was this dark & foreboding place, NK was small & cramped, Nyaga ran out of one office within Nyaga's accounting practice, Thuo had larger offices but nothing fancy!

TCG - They need to inform the CMA before they sell stock since they control EA Cables.

Shouldn't mbaru be in the forefront to advocate better advice for customers? In mitigation, you can't blame mbaru coz investors should research & advice are opinions anyway!

Why didn't NSE act on EAPCC before when the issue has been around for donkey's years?

bankelele said...

coldtusker: yes he's an acknnowledged expert consultant as member of the african stock exchange association (ASEA) - read up on them. Hmm seems' stockbroking has come a long way

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