The unchallenged dominance of five companies at the helm of the stock market like Safaricom has seen the Capital Markets Authority (CMA) raise concerns over big risks with the performance of their shares dictating how the markets perform each day. The firms have grown up 11.4 pc of their share of the market’s total investor at the Nairobi Securities Exchange (NSE) up to 76.4pc in 2020 from 65 percent in 2017.
Due to this amount of influence, investors are having a hard time measuring the true performance of the bourse. The firms which are Kenya's largest telco Safaricom, Equity Bank Group, East Africa Breweries Limited (EABL), KCB Group, and Co-operative Bank hold a combined market value of Sh1.669 trillion, compared to the total NSE market cap of Sh2.183 trillion. Safaricom alone holds 54.1pc of the total market with its valuation of Sh1.181 trillion. “Market concentration remains a key risk within the Kenyan capital markets landscape… the top five companies by market capitalization accounted for an average of 74.14 percent (in quarter one), the highest in the last four quarters, further increasing the exposure risk that the Kenyan market faces,” said the CMA in its market soundness report for quarter one 2020. One of the major factors behind the dominance of the five firms is the drought in big-ticket listings at the Nairobi bourse in recent years. Delisting of firms like KenolKobil and the diminishing value of major stocks like struggling Kenya Airways and broke Kenya Power and Lighting Company has left the five firms unchallenged at the helm. The CMA has said the only way to save the market is by fresh listings of high-value firms to correct the market imbalance. “To diversify the number and quality of listed entities the CMA is working with market players – Privatisation Commission, Kenya Private Sector Alliance, Kenya Association of Manufacturers amongst others in identifying potential issuers within the Kenyan market – both large-cap and SMEs as a way of increasing diversity within the Kenyan market,” said the regulator.