Category Archives: NSE investor awareness

Investing: Use Social Networks, don’t be used

All data indicates a new age of interest in retail investing. Across the world more people than ever are starting to trade for the first time, with reports of retail participation in the US stock market, for example, increasing from 10% in 2019 to 25% in 2020. Even during a public relations disaster, Robinhood- the U.S retail-focused trading app- onboarded 600k new clients in a single day. Our brokerage, Equiti Group/ FXPesa, saw volumes and client numbers increase by multiples across all our key markets and this will continue through this year.

The pandemic created an environment where people were looking for an income in the safety of their own home and, logically, that trading/ investing answered that need. Anything that brings a heightened awareness of financial literacy is a great thing, but it’s also something that we need to nurture. With millions entering the financial markets for the first time, unfortunately, scams, misinformation and false promises follow, and we must increase consciousness of this.

Social Networks: Most of the world has been following the journey of a supposed war between those on a Reddit forum called r/WallStreetBets and hedge funds betting on the demise of American electronic games supplier GameStop (going ‘short’). This battle was trending on all major social networks, such as Twitter, Facebook, Telegram and Instagram. These networks are powerful, Reddit has 160 million unique visits to its site each month.

People that had never invested before frantically set up trading accounts and placed trades with as much capital as they could put their hands on. Some naïve first-timers often had very little notion of risk or what they were doing, but instead paid full attention to the latest funny meme or influencer that told them that this stock was ‘going to the moon’. It did, and then it came back again leaving a lot of people losing a lot of money.

Ignoring Fundamentals: Social networks and online personalities have an increasing amount of influence over investors. Recently, Elon Musk the CEO of Tesla added 12% to the value of Bitcoin simply by changing his bio to the bitcoin Twitter hashtag. With the wave of memes, online ‘experts’ and celebrities pushing their agendas, the fundamentals of great companies are becoming secondary. We need to acknowledge this and attempt to educate differently.

A perfect example of this was the recent movement in the Silver price. Silver is widely regarded as an undervalued metal, mainly because of its increasing utility in ‘green technologies’, such as solar panels. Various reports declare solar panels and wind turbines will require three times more silver than what is used today. Silver is also used in electric car production and other tech of the future. When the silver price jumped 12% (its biggest intraday rise since 2008), it was not because of these fundamentals. The price jumped primarily because social media declared the same war with hedge funds and decided to try to do the GameStop ‘trick’ again, making the Twitter hashtags #shortsqueeze and #silvershortsqueeze trend across the world. The silver market is huge and not as easily manipulated as a relatively small stock such as GameStop, and so this attempt was doomed, with silver retracing back very quickly and lots of retail traders losing more money. 

All this focus away from fundamentals, meant that the market was quite late to understand the stellar Q4 earnings shown by some great companies, especially Big US Tech firms. Amazon posted $126 billion Q4 revenue and shows no sign of slowing. Google saw a 23% revenue growth in Q4. Unfortunately, the circa 4-6% share price increases these saw due to these results aren’t considered attractive enough to those only seeking the 16x returns GameStop gave some in just 2 weeks. There is so much real opportunity in the markets, especially now.

Scams: If you were to investigate your junk mail (don’t!), you would have probably been sent a scam email within the last 24hrs. It is most likely centred around cryptocurrencies, where it is promising huge returns from trading obscure crypto that you have never heard of. Some of the recent scams are from hackers sending out tweets from reputable, businessmen like Jeff Bezos and even former presidents such as Barack Obama’s certified accounts. They ask for the trusting public to send bitcoin to a wallet and then wait for 2x back.

Unfortunately, as unlikely as these scams may seem, the public is losing millions of dollars to them daily. In today’s ‘at once’ society, many aren’t thinking of growing knowledge and wealth over a long period. Instead, they want instant gratification and huge profits, as is the expectation in most walks of life now. Now, if you want something, you want it immediately- but my experience of wealth generation is the very opposite of this. It takes time to do it right.

Long-term side-effects: Social media has been an excellent source of information for new traders, keen to improve their financial futures. However, there is cause for concern if these young and new entrants blindly follow investment ideas that they do not understand, just because the herd are doing the same thing. We have a huge wave of first- time traders ignoring great companies that have incredible distribution channels and solid, multiple revenue streams, instead opting to follow a funny meme of Elon Musk and a Shiba Inu dog (DogeCoin).

A glaring issue is I don’t see how it can work out for these traders. If they make money in these pump-and-dump Reddit schemes, for example, they will invariably put more into the next one and continue until they lose everything. In this search for increasing returns, they are also susceptible to false promises and scams. On the flip side, if they lose their money in the first attempt, they are likely to shut their accounts and never think about their financial futures again. That is a tragedy.

It is far better to work with a brokerage to diversify your investments across global asset classes, regions and short and long-term plays, concentrating on sound fundamental and technical analysis…improving your knowledge day by day, year by year. Understanding this gives you a great chance at achieving real wealth. This has always been exciting enough for me, no meme needed. 

A guest post by Brian Myers (@bjmyersUK), the CEO at Equiti Capital UK.

Absa Kenya One Year Anniversary

Absa Bank Kenya celebrated its one-year anniversary at its newly-redesigned Queensway Branch in downtown Nairobi today. It has been a strange first year for Absa which completed the transformation from the Barclays brand in February 2020, three weeks days before Kenya was enveloped by Covid-19 and underwent a shutdown that, while it has progressively reduced, still affected thousands of business, jobs, and customers, as well as the bank itself.

Speaking at the event, Absa Kenya Managing Director Jeremy Awori said the bank had a great strategy to grow and expand, then Covid-19 hit and the year turned to be one of the challenges for the bank, industry, local and global economy. Absa also began to see opportunities for impact and to demonstrate its humanity and innovations to enable the bank to serve customers as they worked to rebuild their livelihoods. They adjusted to have half their staff work from home and instituted a shift arrangement for front-line workers and these enabled 100% of branches to remain open, while the digital platforms had 99% uptime.

Absa offered financial relief to help customers navigate the pandemic after many lost jobs and businesses. They restructured Kshs 62 billion worth of loan repayments, extending relief to over 59,000 customers. They also continue to lend a sizeable amount to SME’s to stay afloat and provide employment, and also committed to paying small suppliers of the bank within seven days to boost their cash flow.

He added that the bank was cautiously optimistic that 2021 will be a better year, with news of vaccines giving confidence to business and governments to relax containment measures and turn to boost economies. Absa Kenya will invest Shs 1.6 billion in 60 technology projects to enhance customer experiences. One will be to automate loan top-ups, allowing people to get loans on top of existing loans, and another will be a new online business-banking platform.

Absa Kenya Chairman Charles Muchene said the bank contributed Shs 50 million to the Kenya Covid Fund, invested Shs 30 million in initiatives led by partners, and donated 210,000 masks for medical workers, with another 20,000 to boda-boda operators. The bank is now asking Kenyans to join and to help underprivileged. They launched a “Wall of possibilities” for people to write suggestions or ideas on the bank’s social media pages or at the Queensway branch on ways that the bank can assist communities to benefit. Absa may fund each idea with up to Shs 2.5 million.

Stanbic Bank “It Can Be” launch

Stanbic Kenya has launched “It Can Be,” a new way of engaging with customers, particularly with women and small & medium enterprises. Stanbic is the second-oldest bank in Kenya, having started over 100 years ago and grew to later merge with CFC Bank in 2007. Today, it is a Tier-I bank with $3 billion assets in Kenya and serves over 200,000 customers with services in corporate & retail banking, wealth management, investments, and insurance.

“It Can Be” symbolises a new push to engage with customers, in the new decade, beyond Stanbic’s 26 branches in the country. The bank has transformed and adopted digital-based solutions to serve its customers who have also largely shifted to online and digital after business disruptions with the emergence of Covid-19. One new Stanbic tool is automating core functions in documentary trade finance using artificial intelligence (AI) and natural language processing (NLP) for real-time counter-party verification, giving customers quick feedback while reducing trade risks.

The “It Can Be” brand ambassador is Brigid Kosgei, the women’s marathon world-record holder.

Stanbic Kenya CEO Charles Mudiwa spoke at the “It Can Be” launch and mentioned how Covid-19 had shown the importance of relationships and standing with communities. He added that the bank’s customer focus had shifted to being relationship-based and Stanbic has embraced four policy initiatives of funding, markets, business competitiveness and influencing policy. In its third-quarter 2020 financial results, Stanbic Kenya announced that it had extended loan restructurings to 23% of its customers, at no cost, to cushion them from the effects of Covid-19. It also reduced the interest charged on existing loans and waived charges for using the bank’s digital platforms.

Stanbic is the largest bank group in Africa, with $151 billion in assets and a presence in twenty countries on the continent. Its largest shareholder is the Industrial and Commercial Bank of China, the world’s largest bank that owns 20.1%. Stanbic Kenya is listed on the Nairobi Securities Exchange (NSE) and shareholders receive a high dividend yield of 8%. Stanbic Africa is also increasing its shareholding of the Kenyan bank to 75% by buying shares from other shareholders.

African Investor? Think Global

Huge potential financial returns from global markets:

The financial markets have started like a rocket this year. The main global indices have incredible resilience through the current pandemic and political turmoil. The German Stock index (DAX30) started this year up 80% from its March 2020 low. The US NASDAQ closed off last year with a gain of 43.64% and since the opening of 2021 all the main US indices (Dow Jones, S&P500, NASDAQ) keep relentlessly printing new all-time highs.

Some of the strongest performing global stocks continue to be those that are servicing the needs of a planet in lockdown. For example, ZOOM (ZM), a video communications company that has kept the world connected and has benefitted from a 2020 share price increase of 396%. Peloton (PTON) brought health and fitness into the planet’s living rooms and was rewarded with a 434% increase.

While these stocks are striving to improve lives during the pandemic and beyond, Tesla (TSLA) continues to fight against the global climate crisis. Traders from across the world have bought into the Tesla story, and those that have held the stock since 2019 are smiling with a return of well over 1,000% (none more so than the newly crowned richest man on Earth – Tesla CEO, Elon Musk). On Friday 8th January an incredible $62 billion of Tesla shares were traded, one of the largest daily stock trading volumes in history.

These volumes and returns are not just concentrated on equities. Bitcoin, considered by some as ‘digital gold’, has had an incredible run over the past few months, recently smashing through $40,000. The ‘digital gold’ has returned over 40% to investors in the first trading week of this year alone. Actual gold also performed well, giving a 19% return over the past year. So, equities, indices, commodities, cryptocurrencies- most global asset classes can reward those with access.

Don’t miss out on the global bull-run:

African investors are wise to compare these potential returns to local markets. Many of the African stock exchanges were negative over the past 12 months, with some of the larger ones finishing 2020 down 7 – 15%. The issue here is that most investors in these regions are still predominantly trading local shares/ equities and bonds. Fixed income products are showing extremely poor returns across the world, so the net result for these people is that they are missing the huge global bull-run and it just isn’t fair. It is the mission of my company EGM Securities/ fxPesa to help resolve this issue. The era of holding solely long positions in local stocks and bonds has gone. Africans need and want so much more- and we are determined to give global access and education to anyone that seeks it. We see it as our responsibility to help improve financial literacy across the continent by relentlessly educating the population.

Expect more volatility this year:

On the topic of financial literacy, it is important that we note that we are certainly in a bubble fed by several factors, not least the incredible amount of stimulus from global central banks – more than $9 trillion has been pumped into various markets. There is certainly a disconnect between the global economy symbolised as ‘Main Street’ and the Stock Markets, or ‘Wall Street’. Last week there was a poor jobless claim print (Non-Farm Payroll or NFP) showing unemployment increasing, but in parallel main indices were at record highs. Commentators are calling this a ‘Rational Bubble’, as prices are inflated but with there not being an expected end to the money printing, the bubble looks set to continue.

However, a correction (10% stock market drop) or bear market (over 20% drop) is inevitable. A correction occurs, on average, yearly. A bear market occurs every 3-5 years. We must remember Warren Buffett’s most well-known advice- “Be fearful when others are greedy and greedy when others are fearful”, and for sure the world is being incredibly greedy with the returns they are getting. This is the reason why Tesla and Bitcoin volumes are through the roof. So, if a downturn is inevitable, Africans need the ability to trade and profit from falling markets (going short) – something unknown to many traders in the region.

If you’re an African investor you must think global:

Taking this all in, my point is this – if you are an African investor you must think global. By doing this, the investor can tap into heavily traded markets moving with potentially larger returns. You should find a brokerage that you trust and that, like mine, allows access to global indices, foreign exchange (fx), commodities and shares, so that you can diversify your portfolio away from just local equities and bonds. It’s important that you educate yourself in financial products that will allow you to benefit from falling markets. By doing this and constantly learning, you will be on a great path towards financial freedom.

Follow me @bjmyersUK

A guest post by Brian Myers, the CEO at Equiti Capital UK.

Absa Kenya on Wills, Trusts and Succession Planning

Absa Kenya has been holding thought leadership seminars since their rebrand in February 2020.

This week they had an investor education connect session on wealth management, with a focus on wills, trusts and succession planning which featured Madabhushi Soundarajan (Managing Director, MTC Trust), Peter Waiyaki (Partner at Mboya, Wangong’u & Waiyaki Advocates) and Anthony Mwithiga (CEO, Absa Asset Management).

Some excerpts 

Wills:

  • People don’t do wills because they think they have nothing – but anyone over 18 who has been working has something to give. 
  • Another excuse of some educated Kenyans is they think they are courting death or will be marked for death by their families
  • Can do a will in an hour or five years. It does not have to be expensive or complex.  
  • A will should have two things to help a will (i)  a residual clause. assets grow after the will make sure any other assets be distributed the way the old “any other assets  (you don’t have o make a new will (ii) creation of a testamentary trust. 
  • Let your family know where your will is kept. If two wills emerge, the latter one will be used. If a will is destroyed, it is not valid.
  • If someone remarries, it invalidates a will because they are considered to have new dependents. 
  • Do not include matrimonial property should not be in a will. Or joint owner – when someone dies the spouse inherits the full property. They should not be in the will. 
  • Also don’t put investment or trust property in a will.
  • Proof of dependence: wives and children do not need to prove they are dependents. This also includes conceived but not yet born and adopted kids. But parents or siblings of a deceased must prove they are dependent. Also in Kenya, a husband/man will have to prove  he was being supported by a woman.
  • Covid situation: Oral wills are only valid for 3 months and must be mentioned in the presence of two witnesses who are not beneficiaries. And for a written will, someone in a hospital, surrounded by relatives is not considered to have the freedom to write a will. 
  • Without a will, only the family of a deceased person can inherit from the estate. No gifts to charities, churches etc. are recognized. 
  • Do not put assets in a will that already have nominated beneficiaries elsewhere e.g. life insurance, pension funds. 

Trusts:

  • Have the philosophy of giving things up as you will nor carry your wealth to the grave – so start thinking about preservation.
  • Banks are getting worried about lending to trusts. 
  • A trust is not a legal entity, a foundation is a better legal entity that can be created to run a school or a hospital.
  • Most common are discretionary trusts and others are ones that founders can create to run businesses for their families
  • A trust is a lengthy document. In a trust, you can exclude rogue children. 
  • To set up a trust; define the objectives, the trust structure, the beneficiaries, the trustees (ideally a corporate) and seek professional advice. 

Investments:

  • Use professionals e.g. in a unit trust to administer investments if you are too busy. 
  • If you have a vision, take a lead and invest in it so that others will follow.  
  • the realty over the last five year is the property prices can go down, unbelievable to many investors of 15 years ago. Covid has hit offices and malls, but there are still investments in residential, logistic and warehousing ventures.
  • Attributes of an ideal asset; gives returns, it should grow, it should be liquid, be understandable and It should also be secure (legal ownership & from damage). Individuals and families have investment portfolios, as it is not possible to get one asset to full all these attributes. 
  • The investment universe encompasses money markets, treasury bills, bank deposits, and listed shares which now includes a New Gold ETF.  Also unlisted shares (shares in a business stems/OTC), real estate, and alternatives such as derivatives, commodities, currencies and infrastructure projects which is a new asset class open to pension funds.

Suggestions:

  • Everyone should discover what type of investor they are and what stage they are on the life journey to understand what to invest in. 
  • Think investments beyond Covid-19.
  • Write a will today; there is no way of running from your dependents –  except through trusts, which allow one to better organize estates.
  • The best non-taxable investment in Kenya is infrastructure bonds.