IPOs, sleepy markets and ‘Margaret Thatcher Moment’ for Kenya – Business Daily
President William Ruto (seated, right), and his deputy Rigathi Gachagua with corporate chiefs at the NSE on October 11, 2022. PHOTO | DIANA NGILA | NMG
It’s exactly seven years, eight months and eight days ago since the NSE 20 share index topped and began its long slumber date. In between, a lot happened: Leonardo DiCaprio finally won an Oscar, the world went crazy over Pokemon Go, somehow Kenya participated at the Winter Olympics, and Donald Trump became President.
LL Cool J won back the Rock The Bells trademark, the world got its first-ever photo of a black hole, Greece announced bankruptcy and Kenya got a new President.
Sadly, for equities, the only highlight is that they went back in time. Back to 2002; meaning they had to shed more than 70 percent of value. Utterly disheartening. The market is desperate for a shake-up. Something new. Something to awaken it from deep slumber.
I was pleased to hear the new administration considering floating some public companies. I can only wish they pick the solid ones. Zombies can wait. What we need now is the 2008 cheer, not a “Thriller Night”. This could well be the “Margaret Thatcher Moment” — the late Thatcher transformed the British economy through privatisation policies and other reforms such as the “big bang” financial reforms.
Her vision of a nation of shareholders resulted in mass individual share ownership. Suffice it to say, over the course of her 11-year premiership, the market nearly quadrupled.
But here, our past should also guide us. Pricing initial public offers (IPOs)cheaply so that the masses can flip them for quick profit will not deliver the long term results. Equally, giving steep discounts to ensure heavy demand and a first day premium so as to claim the sale was a success will eventually come to haunt the market.
It is simply not healthy. It’s not investing. It’s the kind of short-termism killing investor dreams.
But these good plans face a brutal macro environment. Everyone is worried about a looming global recession. The dollar’s gain (up more than 10 percent compared to other top currencies) is hurting us. War in Ukraine has hit prices.
There’s also an expectation that the central bank will deliver its third rate hike for the year in the coming policy meeting to tame inflation. It is no surprise the IMF revised down our growth outlook by 40 basis points to 5.3 percent for 2022 just last week.
Plus, historically, our markets invariably struggle when the central bank goes on a hiking mode. Against these odds, I choose to believe President William Ruto’s “within 12 months” comment meant a determination to hasten the listing but not cram everything inside a single year.
I support a culture of investing. On that, there should be no looking back. To end, allow me to borrow an excerpt from Mrs Thatcher’s speech, ‘The Lady’s Not for Turning’: “If our people feel that they are part of a great nation and they are prepared to will the means to keep it great, then a great nation we shall be, and shall remain. So, what can stop us from achieving this? What then stands in our way?”
Mwanyasi is MD, Canaan Capital.