The top 15 Kenyan investors at the Nairobi Securities Exchange (NSE) went through another tough year with their equities’ portfolio shrinking by an additional Sh13.8 billion as the bear run closes its second year.
The investors, including four who have since lost their stock market billionaire titles, booked a combined paper loss of Sh27.3 billion in 2015 when the market started falling after a three-year bull run.
Cumulatively, the capital loss of the investors now tops the Sh41 billion mark, ranking them among the major victims of the bear market alongside institutional investors including pension funds.
Billionaire investor John Kibunga Kimani — who bucked the trend last year with an overall portfolio gain of Sh463 million boosted by a rally in his Kakuzi holdings — has entered the losers’ list after the agricultural firm’s stock was swept by the bear avalanche.
He joins James Mwangi (Equity Group CEO), Chris Kirubi (Centum director), Pradeep Paunrana (ARM Cement CEO), Baloobhai Patel, Peter Munga (Equity Group chairman) and nine others whose capital loss in this year alone ranges from Sh215 million to Sh2.3 billion.
The stock market rout can be seen from the 39.2 per cent drop in the benchmark NSE20 Share Index from 5,117.4 at the beginning of 2015 to 3,106.9 on Thursday. That fall is enough to wipe out an investor’s previous 78.5 per cent capital gain, with actual losses depending on the portfolio mix.
While the big investors have traditionally rode out market cycles to avoid realising the losses, this bear market has partly been driven by unique factors that may make some of the losses permanent.
The capping of interest rates effective September is set to significantly cut profit margins in the banking industry’s mainstay lending business, with smaller lenders suffering the most from the new normal.
Investors have priced in the new regulatory environment, erasing tens of billions of shillings from banking stocks. Several listed firms have also been punished by the market in the wake of corporate scandals involving executives, directors and major shareholders.
Mr Mwangi has the biggest paper loss this year, with his holdings of Britam and Equity shares down Sh2.3 billion or 26.5 per cent since the beginning of the year.
Shares of the two companies moved south by nearly the same margin but Mr Mwangi has a higher absolute paper loss of Sh1.9 billion in the bank, thanks to the controlled interest rate spread currently at seven per cent.
The Banking (Amendment) Act 2015 sets the floor for deposit rates at 70 per cent of the Central Bank Rate and a ceiling for lending rates at four percentage points above the benchmark rate.
This places the current interest rate on interest-bearing accounts at a minimum of seven per cent and the lending rate at a maximum of 14 per cent, with the CBR at 10 per cent.
Mr Kirubi’s ownership of a 30 per cent stake in Centum generated the second biggest paper loss this year of Sh2 billion as the stock cooled off having rallied on news of planned mega projects including a coal-fired power plant in Lamu.
Mr Paunrana’s portfolio of ARM Cement’s shares is down by Sh1.5 billion besides being diluted 40 per cent alongside other investors with the entry of UK sovereign wealth fund CDC Group which provided Sh14 billion to save the company from creditors, including banks.
Mr Patel, the most diversified high-net-worth investor, took a Sh1.41 billion hit from his shareholding in Sanlam Kenya, Diamond Trust Bank, Barclays Bank of Kenya and Bamburi Cement, among others.
Mr Munga’s interests in Equity and Britam have generated a Sh1.4 billion paper loss, with most of the decline in the insurer where he recently acquired an additional 23.3 per cent stake for an undisclosed price.
The extra shares, which he intends to sell in the short term, were acquired from the government of Mauritius which seized them from its citizen Dawood Rawat who has been accused of running a ponzi scheme in the island nation.
Mr Mbaru has a Sh751.1 million paper loss from his Britam shares whose price has receded to Sh9.9 or just 10 per cent above the 2011 initial public offering price of Sh9.
Mr Kimani is ending the year with a capital loss of Sh741.1 million after taking a Sh268.8 million hit from Kakuzi which had last year rallied amid a general slide in his portfolio that includes East African Breweries, Nation Media Group and Centum.
He is followed by Mr Muriuki who is down by Sh719 million from his stakes at Co-op Bank and CIC Insurance.
Other top investors who have hundreds of millions of shillings in paper losses include WPP Scangroup CEO Bharat Thakrar, Leah Muguku, Simon Thuo and Franklin Ndii whose portfolios have been relegated below the Sh1 billion mark.
The portfolios of Jane Njuguna and city lawyer Jane Michuki stood above the Sh1.7 billion mark each despite the investors’ paper losses of Sh360.2 million and Sh673.8 million respectively.