Friday, March 09, 2007

catch 22

the new nation business daily reports that fund managers are holding billions of shillings from the equity market in order to allow the market to auto correct. the general feeling which was echoed by most bloggers and investment sites last year was that the NSE was over heated. that perharps explains why all the counters are recording steady decline just the way they recorded appreciation last year based on no fundamentals at all. However the catch is, given that the fund managers are withholding cash, foreign investors are also holding out siting the fact that the NSE is thus illiquid. what to do!?

i suppose most of these money will find their way into the 15 year bond launched by the govt the other day. bonds are risk free and offer a constant coupon. even though low, you dont have the headache or heartache associated with equity. however you also miss out on the adrenaline rush. the adventure, the excitment, the tears and pain associated with investing in stocks. i always argue that the bond market is for old people and the stock market is for young people. if you are young take the risk. even if you lose 1 million bob, you still have time to make a new one and re-invest. if you are old and probably retired then you need stability and predication, so bonds are good enough, plus at old age you dont need too much return anyway. you have been there, done that, got a heart break. problem is the last govt bond was oversubscribed by 150%!


otherwise you can also wait with the fund managers for the correction and instead direct your energies elsewhere eg lease a wheat farm in narok, or hire a fishing boat in sio port, misori beach or sori. you will beat the NSE pants down. if thats not your cup of tea then get a matatu!

odegle promise of the day ... we will post here how and why of the bonds and bills market

8 comments:

  1. what do you feel about investments in the housing market? Rental property for KSh10M generate Ksh100K (Nyumbanet.com). This returns your original investment within 8 yrs (holding rent contant). That is 12% return/year, plus the property might appreciate by another 25%. This will give you sweat-free 15% return/year on a rather "liquid" investment.

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  2. The lack of big players in the mkt is compounded by the endless, pointless and dilutive share spilts that mean share movement is minimal at best. It also seems to me that manipulation is it still taking place big time. BBK goes to ksh60 back up to ksh68 and then its now heading to back down to ksh60 with no supporting events?

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  3. I was looking at the price/volume charts and for most of the counters volume seems to have dried up.

    My guess is that small time brokers and retailers are the ones offloading their stocks. The institutional investors don't seem to be part of the action.

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  4. @anon ... by 10M do you mean you are puting up the house yourself of buying? let me give you a hint, a 4 bedroom apartment in brookside goes for 11M at the moment. i am not sure you will be able to rent out that for 100K for 8 years. secondly, as more aprtments and highrise buildings come up in these areas, the price of houses eventualy come down as opposed to going up. if you are taking a mortgage, then you need to factor in mortgage interest plus time value of money. do the math and tell me if you are still making money.

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  5. So foreigners wont come in coz we dont have liquidity and Fund managers wont supply liquidity(buy shares) because they r waiting for an Auto-correction(prices to fall further)

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  6. Odegle, while the sio port (please give me directions) idea sounds quite enticing, i still think buy time is now. take position now without looking at the quick gain possibility. Since the decline magnitude is gradually reducing, i'd go for acquiring the shares now. One might decide to wait then once the market gets back on its feet, try to get onto the bus while its already started moving, and start rueing their not having bought when the prices were lower.

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  7. i agree with you hisagal, the decline gave the best orpotunity to buy into the NSE. problem is most 'investors' buy when things head north else they take they money elsewhere. so instead of taking their money to those dubious ponzi scams, i would rather they put money is something reasonable like fish at sio port. Sio port, is near busia kenya. but you can also get there through siaya though as expected the road is terrible (govt punishment!)

    but you will agree with me that recent developments and revelations at the NSE were far from flattering

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  8. You should be able to find a suitable property to buy for investment purposes from this kenyan site, www.property.co.ke. I found three listed by Lloyd Masika, Hass Consult and Villa Care which am considering. If you are looking for property to buy or rent in kenya, then property.co.ke will give u a lot to work with

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