Friday 2 January 2009

To suspend investment dealing or not?

These have been interesting times. One of my pioneer fund managers suspended dealing on 11 December 2008 citing the increased redemptions from investors, weakened liquidity in Sub Saharan markets and naturally the credit crunch. Apparently these big fish were heavily invested in Nigeria and Ghana (at 30% and 21% respectively).



From my experience such actions are usually self defeating. If I recall correctly, when the Nigerian stock exchange imposed a circuit breaker on the falls in value of its constituent stocks sometime back, the temporary stabilisation in values during the short period, which had all along been representative of a drizzle became more of a storm as the subsequent loss in value took to levels unheard of before.


Whereas we all appreciate the fact that these are tough times, I've never really believed that micro managing the market will beget sensible results. In my experience it always results in a vicious cycle of downward spirals that are even much harder to address, let alone control, than the initial circumstances.


However, the most disappointing aspect about all this is not necessarily the reaction of the fund managers but rather the investors. Hedge funds have historically been required to notify investors of the levels of risk; which they do or at least try to do. I've always understood that any funds that an investor (or even a speculator) will need in the short run (read one to 5 years) do not belong in the stock market. Apparently the definition of short run has now been shortened to 3 months. I now know that hedge funds and their investors are the biggest speculators of all.


Did we have a silver lining in all of this? You betcha - as the very powerful Sarah Palin once said. I recently picked up on the habit of coat tailing which has proved quite excellent in these dim times.

I took part in the Coop Bank IPO in Kenya and it was undersubscribed, we got our 100% allocation and are watching the situation very closely. There have been some discussions that the share price is being artificially propped up in some other fora.



Moreover, we are finally getting confirmation that the NIC Uganda IPO, which I highlighted in my earlier posts is finally kicking off sometime in the first quarter. The positive news about this is that the responsible investment bank sponsoring this IPO has come to terms with common sense and reasoned to postpone an IPO until after this credit crunch nonsense. Number crunching on this will be presented a little closed to the listing time.

As ardent readers will have noticed, we've been away for quite some time. Details of what we were up to will be provided in the next blog.