1 / 25

Commodities Exchange and Risk Mitigation: Options for Raising Capital

This presentation by Mr. Jimnah Mbaru, Chairman of the Nairobi Stock Exchange and Dyer & Blair Investment Bank, explores the structure of the Nairobi Stock Exchange, its performance drivers, and the role of a commodities exchange in raising capital. It also discusses the options available for raising capital and concludes with a Q&A session.

justice
Télécharger la présentation

Commodities Exchange and Risk Mitigation: Options for Raising Capital

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Commodities Exchange and Risk Mitigation: Options for Raising Capital A presentation by Mr. Jimnah Mbaru Chairman, Nairobi Stock Exchange Chairman, Dyer & Blair Investment Bank 17 October 2007

  2. STRUCTURE OF PRESENTATION • Introduction • Structure of Nairobi Stock Exchange (NSE) • NSE Performance • Drivers of NSE • Role of Commodities Exchange • Options for Raising Capital • Conclusion • Q&A

  3. STRUCTURE OF THE NAIROBI STOCK EXCHANGE (NSE) • Established in 1954 as an overseas stock exchange through the London Stock Exchange • NSE 20-share index established in 1966 & was managed by Dyer and Blair Ltd. • Regulated by the Capital Markets Authority (CMA), which was established in 1989 • Primary (IPOS) & Secondary (Trading) markets • Part of the African Securities Exchange Association (ASEA), which aims to: • Establish systematic corporation, • Enhance sharing of information • Development of harmonized market standards.

  4. STRUCTURE OF THE NSE Cont’d • 74 government bonds • 53 listed companies • 6 corporate bonds • 7 Licensed Investment Banks • 11 Licensed Stockbrokers • Market trading done through: • 1954 – 1991: Callover System • 1991 – Aug 2006: Open Outcry System • Since Sept 2006 : Automated Trading System • Shares are traded in lots of 100

  5. NSE Market Performance(A) Equities Primary Market (Kshs Million)

  6. NSE Market Performance B) Equities Secondary Market

  7. NSE Index Movement (2000-2007)

  8. NSE Performance   (C) Bonds Primary/Secondary Market

  9. (A) Drivers of NSE: The Economy • Vision 2030 geared towards growth

  10. (B) Drivers of NSE: Economic Monetary Cycle

  11. (C) Drivers of NSE - Technology Effects ATS Set-Up Open Outcry 1991- Switch from Callover CDS Activation

  12. (D) Drivers of NSE – Low Interest Rates • Low stable interest rates • Low cost of funding hence high corporate profitability

  13. Explanation to the low interest rates • Deficit financing through privatization

  14. (E) Other Factors influencing NSE Performance • Increased corporate profitability • Increased foreign exchange earnings – FDI • Diaspora remittances estimated at Kshs 75Bn per annum ($1.2Bn) • Increase in amounts held by institutions e.g. pension funds assets of Kshs 224Bn • Increase in investment vehicles – unit trusts, mutual funds assets of 20Bn • Increase in market participants to over 750,000 investors • KENGEN

  15. Role of Commodities Exchange Facilitates offsetting commodity transactions without impacting on physical goods until the expiry of a contract • Offers • Price transparency • Effective price discovery • Efficient risk management • Types • Commodities Futures Exchange • Spot Exchange • Market players • Producers, processors, warehouses • Buyers, speculators • Government, marketing agencies, banks

  16. Benefits to; • Farmers • Price discovery • Warehousing services • Warehouse receipts as collateral for loans • Traders • Access to bigger markets • Elimination of counterparty risks through guarantees • Better pricing because of high number of participants • Exporters • Quality products through a secured platform • Elimination of physical market procurement problems • Elimination of procurement agents fees

  17. Benefits to; • End Users • Ability to buy direct at competitive prices • Operational comfort - easy to access information • The exchange I s a single window system for procurement of various materials • The Exchange • Fair transparent prices for settlement of contracts • Arbitrage opportunities for investors • Long-term investors can buy physical commodities stored at warehouses and take advantage of off-season price rises

  18. Challenges for Multiple Commodities Exchange in Kenya (MCE) • Commodities controlled by Boards - heavily regulated • Many small-scale producers- challenge on stability of client base • In an environment of struggling institutions – cooperatives • Inefficiencies and mismanagement • Internal bureaucracies on elective posts and decision making process • Conservative approach • Partial liberalization of some commodities sectors (coffee)

  19. Options for Raising Capital (Players) • Private Equity/Capital • Private equity fund • Syndicated • Initial public offer - IPO • Demutualized commodities exchange • Nairobi Stock Exchange (NSE) • Over The Counter (OTC) • Listing Requirements • Corporate bonds • Plain vanilla bonds

  20. Options for Raising Capital (Players) • Securitization • Commodities receipts backed bonds • Fees receivables backed bonds • Syndicated loans • backed by physical commodities (Coffee exchange practice)

  21. Role Of Government In Setting Up The Exchange • One-off grant to start (Kshs 1 billion) • Reforms in the producer sector • Exchange income tax exempt until demutualized • Provide warehousing (Subsidized) • Plan a regulatory body for commodities

  22. Conclusion • Possible to raise funds through NSE • Reforms essential for successful MCE in Kenya • MCE way forward • Government cooperation and support essential

  23. Q & A THANK YOU

  24. 10th Floor, Loita House, Loita Street P.O. Box 45396-00100 Nairobi, Kenya Tel: +254-2-3240000 Fax: +254-20-3240114 Website: www.dyerandblair.com

More Related