Nearly 97 percent of equities accounts used for trading at the Nairobi Securities Exchange ( NSE ) have been dormant in the past two years, revealing the apathy among retail investors who entered the market during the 2000s IPO boom.
Only 61,000 of the 2.03 million share accounts at the Central Depository and Settlement Corporation (CDSC) have participated in trading over the two years, representing a three percent share.
Analysts said the reduced participation of retail investors is largely a reflection of the high-level speculation that dominates their investment decisions.
They remained muted after Safaricom IPO of 2008, which brought nearly one million new investors to market after the telecoms operators failed a repeat of the KenGen debut experience in 2006 when the energy firm’s shares doubled their offer value.
Safaricom’s share price remained below the IPO price for nearly five years.
CDSC chief executive officer Nkoregamba Mwebesa told the Business Daily that the percentage of active accounts recovered from a low as 1.2 percent last year to the current three percent following the campaign to encourage dormant account holders to return to the market.
“A lot of the accounts came in through the bull market IPOs we had between 2006 and 2009. Some people have never touched their accounts since then, and some may have even forgotten who their broker was…we’ve got accounts that are sitting with shares, and others with cash at the depository agent offices,” said Mr Mwebesa.
“As part of strategic initiatives, we thought that if we could increase that number we could see more throughput in the market in terms of turnover at the exchange. Our goal was to double the number of active accounts during the period of the strategy and we actually achieved that in the first six months.”
He added that the newly revived accounts generated 20 percent of the NSE’s trading activity in 2021, indicating the size of revenue market players is foregoing due to the inactivity of investors.
The CDSC had from 2019 decided to freeze share accounts that had been inactive for a period of two years, barring them from transacting unless the owners applied to the corporation for reactivation.
This was meant to protect investors against fraud, particularly those accounts that held cash balances.Upon freezing of an account, the CDSC then sent a notification to the account holders informing them of the declaration of dormancy, asking them to visit their stockbroker to reactivate their account.A majority of […]
