The National Social Security Fund (NSSF) has seen the value of its listed equities drop 28.6 percent or Sh18.5 billion in the past 20 months, with most of the paper losses brought by the recent market panic.
The State-controlled fund reported investments valued at Sh64.5 billion in 28 companies listed on the Nairobi Securities Exchange (NSE) as of June 30, 2018.
The same number of shares in the companies, including Safaricom #ticker:SCOM and KCB #ticker:KCB, would now be valued at Sh46 billion, based on Tuesday’s closing prices.
NSSF’s portfolio shows the kind of paper losses a diversified investor would have seen over the period as nearly all stocks tumbled, mainly due to fears of recession as the Coronavirus spreads around the world.
It also indicates that retirees, who make contributions to NSSF and other fund managers, will be worse off in the short term.
NSSF’s paper losses, however, are being mitigated by dividends. NSSF earns dividends running into Sh3 billion per year.
But reduced economic activities could hurt corporate earnings by a significant margin, ultimately reducing dividend payouts.
The fund is also expected to have continually bought more shares as it receives members’ contributions, helping it to average down its investment cost.
NSSF collects about Sh14 billion from members each year and invests part of the cash in stocks. Most of its paper losses over the 20-month period are concentrated in blue-chip firms whose stocks have been battered on a mix of weaker fundamentals and the general market sell-off.
Its holdings at Bamburi Cement #ticker:BAMB dropped from Sh10.4 billion to Sh2.9 billion, marking the largest decline of Sh7.5 billion or 72 percent in the portfolio. The company’s share price was already on a free fall before the latest slide as investors reacted to its reduced earnings that are partly the result of fierce cement price wars.
NSSF can expect a total dividend of Sh296.6 million from the cement manufacturer if it maintains its payout of Sh5 per share.
The second-largest decline is in Safaricom, with the fund’s holdings dropping by Sh2.3 billion to Sh13.4 billion.
The fund could earn Sh1 billion from the telco if it maintains its payout of Sh1.87 per share.
However, it booked major gains from the buyout of National Bank by KCB Group.
The value of its holdings of NBK shares jumped from Sh1 billion to Sh1.6 billion when they were converted to KCB shares in the share swap deal.
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