Nairobi Securities Exchange PLC · NSEKE:NSE
Nairobi Securities Exchange — Nairobi Stock Exchange — Investor Presentation (April 2005)
40 slides from Nairobi Securities Exchange's investor presentation, Apr 22, 2005
Slide 1: The Role of the Stock Exchange
What is the Stock Exchange? Role of the A PRESENTATION TO THE Stock STAFF Exchange AND MANAGEMENT OF BRITISH AMERICAN TOBACCO LTD. By: Mr. Chris Mwebesa Chief Executive at the Bimonthly Team Brief on 22 April 2005 NAIROBI STOCK EXCHANGE
Slide 2: Table of Contents
TABLE OF CONTENTS What is the Stock Exchange? Types of Users Products traded at the NSE: Shares and bonds Money Management Challenges for the NSE– New Products Cross listing - The East African Potential The Role of Information Communication Technology (ICTs) Target
Slide 3: What is the Stock Exchange?
What is the Stock Exchange? NAIROBI STOCK EXCHANGE
Slide 4: Some definitions
Some definitions:- A market in which shares of stock are bought and sold. The organized trading of securities through various exchanges and through the over-the-counter market. A "stock exchange" is a specific form of a stock market, a physical location where stocks and bonds are bought and so
Slide 5: Stock Market Indicators: Market Capitalisation & NSE Index
Stock Market Indicators: Market Capitalisation & NSE Index NSE 20-Share Index and Market Cap. for the Period Sept 2002- 22 February 2005 3,500 400 350 3,000 300 2,500 NSE 20-Share Index 250 (Ksh. Billion) Market Cap. 200 2,000 150 1,500 100 1,000 50 Mar-03 Mar-04 Nov-04 Jun-03 Jun-04 1 April-05 15 A
Slide 6: 91-Day T-Bill Interest Rates Sept 2003 – April 2005
91Day T-Bill Interest Rates Sept 2003 – April 2005 Interest Rates Trend in the 91-Day Treasury Bills 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Sep-03 Dec-03 J un-04 13-Sep-2004 Nov -04 21-J an-05 21-Feb-05 14-Mar-05 4-Apr-05 Mar-04 4-Oct-2004 3-J an-05 91 Day
Slide 7: Types of Users
Types of Users NAIROBI STOCK EXCHANGE
Slide 8: Investors
Investors The owner of a financial asset. An organization, corporation, individual, or other entity that acquires an ownership position in an investment, assuming risk of loss in exchange for anticipated returns. A person whose principal concern in the purchase of a security is the minimizing of
Slide 9: Speculator
Speculator Speculators buy, hold, and sell stocks, commodities, futures, currencies, collectibles, real estate, or any valuable thing to profit from fluctuations in its price as opposed to buying it for use or for income - dividends, rent etc. Speculation is one of three market roles in western fi
Slide 10: Trader
Trader Any investor who makes frequent purchases or sales for his or her own account,typically for short-term profits. Professional traders, also known as competitive or floor traders, are individuals who buy and sell securities for their own accounts. They don't pay commissions, so they can pro
Slide 11: Products traded at the NSE: Shares and Bonds
Products traded at the NSE: Shares and Bonds NAIROBI STOCK EXCHANGE
Slide 12: What is a Share/What is a Bond
What is a Share/What is a Bond A share is a unit of ownership. A bond is a promise or a covenant; It may also be considered an IOU
Slide 13: Share Trading
Share Trading • The NSE member firms (Stockbrokers) take buy and sell orders from clients; • The client can obtain a list of member firms from the NSE Marketing Desk, the NSE website or the NSE Annual report; • Typically, shares are bought in lots of 100 or Ksh. 3000 whichever is lower; • The Client
Slide 14: Bond Trading
Bond Trading All listed bond transactions should go through the exchange. This is important for the following reasons: • To protect the buyer or seller from fraud; • To facilitate efficient price discovery. Bond Settlement is on a T+3 Basis (the buyer completes payment)
Slide 15: Benefits of Trading in Listed Securities
Benefits of Trading in Listed Securities Income – Dividends from shares. – Fixed coupon payment from treasury and corporate bonds. Capital Gains are tax exempt. Collateral Affordability Operating Convenience Liquidity Hedge against Inflation
Slide 16: The Stockbroker
The Stockbroker NAIROBI STOCK EXCHANGE
Slide 17: Functions of a Stock Broker
Functions of a Stock Broker • Acts as an intermediary between the Stock Exchange and the investor; • Provides advice, guidance and assistance in making investment decisions; • Going through a stock broker, also entitles the client to seek legal recourse through the stock exchange in case of a disput
Slide 18: Money Management
Money Management NAIROBI STOCK EXCHANGE
Slide 19: 10% Inflation destroys your Retirement Fund
10% Inflation destroys your Retirement Fund -and it does not take long! 100 90 80 70 60 50 KShs. 40 30 20 10 0 2001 2002 2003 2004 2005
Slide 20: Investment Returns on Selected Stocks
Investment Returns on Selected Stocks – Assuming an Investment of 10,000 Shares Company Share Amount Total income Invest. price (Ksh)inve (Ksh) realized Returns in (Ksh) sted in (1996-2004) percentag 10,000 e (%) shares 1995 Dividends Sale of shares KQ* (listed in 9.50 95,000 55,575 169,000 136.4 19
Slide 21: Investment Returns on Selected Stocks
Investment Returns on Selected Stocks – Assuming an Investment of 10,000 Shares Company Share Amount Total income Invest. price (Ksh)inve (Ksh) realized Returns in (Ksh) sted in (1996-2004) percentag 10,000 e (%) shares 1995 Dividends Sale of shares Standard 50.00 500,000 733,780 2,194,500 585.7 Cha
Slide 22: Investment Returns on Properties - Land and Buildings
Investment Returns on Properties - Land and Buildings Property Amount Total income % change Invested( (Ksh) on Ksh) 1995 received investmen 2004 t HOUSING Rental Sale 1. 4 br ensuite on ½ an acre plot at: a) Runda 8.5-10M 5.3-5.9M 12-16M 103.5-119.0 b) Buruburu 1.80-1.85M 1.3-1.6M 3.0-5.0M 138.89- 2
Slide 23: Why does a share potentially protect an Investor from Inflation?
Why does a share potentially protect an Investor from Inflation? Because the assets of the company will be rising in value every year - hopefully in line with inflation Because the earnings of the company will be rising in value every year - hopefully in line with inflation Both the above factors
Slide 24: Broad Classification of Equities
Broad Classification of Equities: Blue Chip Stocks High Grade investments in quality companies that have unbroken records of earnings and dividend growth. Growth Stock A growth company is a company that is growing its sales, earnings and market share at a rate greater than the market and economy
Slide 25: Broad Classification of Equities
Broad Classification of Equities: Cyclic Stock Commodity and mining related stocks that are very much dependent on the cycle of the industry that they trade in: Mining Company Chemical Company Cement Company Fishing Company Interest Rate Sensitive Stock Company whose core earnings are depen
Slide 26: Fixed Income Instruments
Fixed Income Instruments Fixed Income Instruments have a longer life to maturity on issue than money market instruments. Fixed Income Instruments are usually offered for 12 months and longer: Government Bonds 1-10 years (The government is the safest borrower as it has the full taxing authority
Slide 27: Fixed Income Instruments: Advantages and Disadvantages
Fixed Income Instruments Advantages Offer a higher level of income than T-Bills Enables one to lock-in income over the medium term - the and plan ahead An active secondary market allows for exit and capital gains Disadvantages Interest rate sensitive
Slide 28: Unit Trusts
Unit Trusts •A unit trust is a pooled investment vehicle where individuals pool their savings together and invest in shares, fixed income securities, money market instruments, property, basically almost all the investment vehicles discussed above • Investors contributions are divided into units, the
Slide 29: Unit Trusts
Unit Trusts: source; www.fundsource.co.nz
Slide 30: Challenges for the NSE - New Products
Challenges for the NSE - New Products NAIROBI STOCK EXCHANGE
Slide 31: New Distinct Market Segments
NEW DISTINCT MARKET SEGMENTS – Money Market, OTC Market and Commodities Exchange The Commodities Exchange The Over the Counter (OTC) Market Facilitate trade in Provision of a market maize, tea, specialty infrastructure for indigenous firms:- coffee, pulses, Companies where the livestock, cotto
Slide 32: Cross listing - The East African Potential
Cross listing - The East African Potential NAIROBI STOCK EXCHANGE
Slide 33: Consequence of a Regional Stock Exchange for the NSE
Cross listing – Consequence of a Regional Stock Exchange for the NSE Kenya : • 48 listed companies (EA Uganda: Breweries already cross- AD 6 listed companies listed in UG, and Kenya D (including 2 whose Airways cross listed in UG primary listing is and TZ). 5 corporate Kenya). 7 Govt. bonds; 83 An G
Slide 34: Challenges to Cross Listing
Challenges to Cross Listing Doing away with domestic or regional monopolistic and oligopolistic practices which create barrier to entry and higher than warranted costs; Doing away with multiple regulators – Market participants who are subject to multiple regulators are likely to face regulatory
Slide 35: The Role of Information Communication Technology (ICT)
The Role of Information Communication Technology (ICT) NAIROBI STOCK EXCHANGE
Slide 36: Technology Path
Technology Path The NSE’s technology path in line with the overall market automation strategy, has four sub projects, namely; 1. Central Depository System – CDS (Done) 2. Automated Trading System - ATS 3. Broker Back and Front Office System - BFO 4. Real time Information Dissemination
Slide 37: Central Depository System (CDS)
Central Depository System (CDS) run by the Central Depository and Settlement Corporation (CDSC) In its simplest definition CDS is For securities, what a bank is for cash For example: Company X issues shares to Party A and party B With no CDS, if A With a CDS decides to sell to environment (share
Slide 38: Target
Target NAIROBI STOCK EXCHANGE
Slide 39: A Virtual East African Stock Exchange
A Virtual East African Stock Exchange • Virtual Linkage to Automated Broker Kenya, Uganda and Tanzania. Front/Back Office on a Wide Area Information Network. Order receipt and confirmation vendor – links to Global via the internet, 24 hours information using services a day, 7 days a week. distri
Slide 40: End
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Nairobi Stock Exchange — Investor Presentation (April 2005) on 6ix