Hezron Kivai

Five Kenyan billionaires lose $177m in Kenyan stock market bear run

Investors in Kenya’s stock market, the Nairobi Stock Exchange lost a whopping Sh259 billion ($2.6 billion) in 2015 alone, in a bear market that saw the Nairobi 20 share index dip by 21 percent.

Five billionaires lost close to Sh20 billion worth of stakeholders’ book value after a year-long fright that fueled capital flight from the bourse, pinned on the currency depreciation and investor speculation.

The U.S. Fed’s decision to stop the economic stimulus program in December 2015 did not help matters, as investors moved to mature markets with more predictable performance. The stimulus program had been lauded for the effect it had on emerging markets, as investors came fishing for returns for the period 2009-2015.

Peter Munga, Equity group Chairman with a 0.4 percent stake in the company, and the biggest individual shareholder (16.99 percent) at Britam, an insurance company, saw his stake lose value by Sh 5.5 billion in 2015.

Equity Group is the largest bank by number of customers in East Africa. The share price for the company lost 26percent in the 52 weeks ending in December, from a high of Sh 50.00 per share to Sh 40.00 at the end of the year. On March 2nd, the share closed at Sh 39.25.

In 2014, Equity Group’s share was the most robust in the Nairobi bourse, gaining 62percent in 52 weeks ending 31st December 2014.

James Mwangi, the CEO for Equity Group, lost Sh 4.0 billion worth of book value in 2015, making him the second most affected billionaire in Kenya. He holds a 4.88 percent stake in Equity Group and 5.37 percent in Britam.

Britam was listed number three on the top ten losers in 2015, eroding 56.3percent of investor book wealth.

In May 2015, James Mwangi resigned from Britam’s Board of Directors in a move that was said to minimize the ‘conflict of interest risks’ between the two entities. This was after Equity Group sold its 24percent stake in Housing Finance to Britam.

Pradeep Paunrama, CEO and top shareholder, Athi River Mining Company (ARM), lost Sh 3.9 billion. His stake at the bourse went down by 51percent, from Sh 7.6 billion to Sh 3.7 billion at the end of 2015.

Pradeep owns a 18.1 percent stake in the cement manufacturing company.  ARM is the third biggest cement manufacturer company in Kenya with an estimated 15percent market share, according to Standard Investment Bank sector report, 2015.

The company reported a Sh 469 million loss in the first nine months ending in September 2015, attributing the loss to the depreciation of the regional currencies against the dollar. As at that time, the Kenya Shilling had lost 12percent on the dollar while the Ugandan shilling had lost 22percent of its value on the US dollar.

Eric Musau, an analyst from Standard Investment Bank, told The Nerve Africa: “ARM Cement will probably depend on the company getting financing”. Reflecting on the company’s prospects, he added, “There is a strategic investor currently doing due diligence”.

Jane Michuki holds 9.2 percent of Britam shares and her shares lost 56 percent from Sh 5.3 billion at the beginning of 2015 to 2.3 billion at the close of the year, a loss of Sh 3 billion.

Britam’s performance mirrored a tough year for the insurance sector in Kenya, but analysts are upbeat on a bounce back on the sector.

Sundeep Raichura, the Chief executive, Alexander Forbes, a financial services firm, is optimistic that the market dip will be followed by prolonged growth.

“There is no need to make knee-jerk reactions and change investment strategies and policies. Staying the course, having the right policy and looking at a reasonable time frame over which one monitors the investment is important,” Raichura told Business Daily, Nairobi.

In a mail to The Nerve, Eric Musau noted, “Insurance companies should start seeing a recovery after a turbulent 2015. Interest rates are starting to come off, which should ease the pressure on the sector”.

Chris Kirubi, the majority shareholder in Centum, an investment firm with 26 percent stake, realized a paper share price loss of 23.8 percent, from Sh 10.6 billion in January to  Sh 8.2 billion at the end of the year, a loss of 2.5 billion.

However, the Nairobi market is expected to bounce back in 2016. The NSE 20 gained 2.4 percent in February 2016 and this trend is expected to continue.