Quarterly portfolio review after last snapshot in November 2008
Diamond Trust ↓
Stanbic (Uganda) ↓
– Best performer: Diamond Trust -8%
– Worst performer Stanbic – 33%, Safaricom -23%
– In: none
– Out: none, but sold a little KCB in January
Events & Outlook
– Performance: Portfolio is down 20% in the last three months while the NSE Index is down 25%
– Did not buy KQ and Kengen as expected, but that should happen in the next few weeks as prices continue to drop
– Sat out the Co-OP IPO and made just one trade in three months (sold some KCB in January). Are brokers generating enough income to stay afloat? I hope they don’t try and introduce new charges levied on dormant investor accounts
– Money markets: Got started in money markets by signing up with a CBA Unit Trust
– Bond markets: The Government of Kenya has lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~600)
– Investor awareness: The CDSC started sending out monthly statements by e-mail to investors, cutting out the postal service, and alerting investors each time shares are bought/sold using their account.
The year is about done and its time to start planning for 2009, with alternatives to build alongside the shares portfolio that will be carried into the new year.
1. Money Markets: Unit trusts are currently offered by African Alliance, Old Mutual, British American, Stanbic, CBA, Suntra, Zimele, ICEA. The bare minimums for signing up are about Kshs. 100,000 (~$1,300), initial fee of 2% and annual fee of 2.
2. Real Estate: It’s time for to undertake a real estate investment that should be done in 2009 following the Pesa Tu’s blueprint though financiers have gone rather shy and some developments appear to have stalled. Have we reached a real estate peak after which it becomes a speculative bubble?
3. Social Networks: Need to invest more in offline social relationships – with buddies, friends, mentors, peers, chama societies and sports for spiritual, social, and physical health.
4. Travel more: My passport has grown mould this year and the need to breathe a different sort of air, see new sights and meet new people – locally and internationally is imperative for 2009. I had always wanted to visit Sauri – the Jeffrey Sachs millennium village, now I must add Kogelo to my travel plans for western Kenya
5. Become a pirate?: Investing is about risk and reward and the numbers are there for the new hot profession of late 2008. It’s not very different from what is my daily bread anyway.
Old Mutual Loosens Up Part II (Corrected, thanks Joyce)
A few years ago Old Mutual unit trusts in Kenya had a minimum entry amount of Kshs. 500,000 ($7,462). Last September, they dropped this to Kshs. 200,000 and now they have gone even lower.
Old Mutual Kenya has launched the Toboa Investment Plan which costs just Kshs. 7,500 ($112) per month to start other funds in the family are money market and balanced fund. Speakers at the launch included Deputy Prime Minister Musalia Mudavadi, NSE CEO Chris Mwebesa, CMA CEO Stella Kilonzo, the new boss of Old Mutual Kenya, and Laura Chakava head of Old Mutual Assets in Kenya – who all spoke of the need for affordable collective investment schemes in the country
– Mudavadi said that while local government act mandated that the town councils should have savings and capital funds to cater for unexpected expenses, these are largely ignored – with only 40 of the 175 councils able to comfortably pay their salaries. Also high savings are a part of Vision 2030, but Kenyan savings rates which were already below the average of other African countries, were dropping
– Mwebesa lamented the 1.5 to 1.8 million CDS account holders in the country; the number is un-serviceable (mailing budget for statements of the CDSC costs almost $1m per year – and this compared unfavorably to account holder level in South Africa (100,000) and Brazil (500,000). He said more people should access the market through collective investment schemes such as unit trusts but whose entry levels had been high (elitist) until now
– Kilonzo and Mwebesa both alluded to a recent survey on investors (June 2008) that showed the level of investor education in teh country was not good. Most people relied on the media for share investment information, and were ignorant of the risks of investing in shares.
– Chakava said Kenyans have appetite for investment as shown in the IPO queues and pyramid schemes. OM now gives them an affordable, professionally managed vehicle for investment beyond the unpredictable buy low, sell high mantra that most investors try and follow.
Toboa will invest in fixed income, equities and off shore. OM, which pioneered unit trusts in Kenya, manages about Kshs. 10 billion, but CIS only control about 2% of the NSE. Other OM trusts have an initial fee of about 3 – 7% and annual fee of 2%, the Toboa will probably be slightly higher than this and will use Posta (post office) outlets to collect payments.
Old mutual loosens up: Old Mutual , the pioneer of unit trusts in Kenya has made some radical changes to it contractual savings plans to cope with a changing market place with many unit trust choices from a competitive fund and insurance industry. Changes include;
– Plans will no longer lapse if premium payments are stopped. E.g. when people get retrenched
– Savings (in a lapsed plan) will remain invested until maturity or can be paid out early
– If your saving plan was terminated without a payout, consider it reinstated!
Credit reference rules: Former finance minister Amos Kimunya was able to gazette the rules for operations of credit reference bureaus in Kenya before he left office. Provisions include;
– Bureaus will be licensed by the central bank
– Signup costs are 100,000 shillings ($1,500), a bank guarantee for 1 million and another fee of 100,000 per year
– Bureaus may share info only with a customers’ permission (which happens when you sign for a loan)
– They may only share information for business decision making (evaluate credit prospects)
– Bureaus must keep track of all information they share
– Customers are entitled to one free report a year, and within 30 days of a negative referral
– if a customer complains, and bureau not able to complete an investigation of disputed information within a month, information will be deleted as request by customer
Undugu at work: More Tanzanian IPO news with the upcoming sale of 21% of the Tanzanian Government shares of the National Microfinance Bank (NMB) to raise 63 billion shillings ($54 million) and later to be listed on the Dar es Salaam Stock Exchange. But the offer is open to to individual Tanzanians and companies that are whole owned by Tanzanians – unlike Stanbic (Ug) and Safaricom (Ke) (which Tanzanians were also barred from subscribing to)