Liquidity of Shares on NSX

While engaging staff concerning financial issues as part of a human resources initiative, an executive from a different division, claiming financial literacy and insights, once advised staff members of a large institution against buying shares, albeit indirectly.

The reasons advanced by the executive was the “lack of liquidity of Namibian stocks on the NSX” and “the difficulty relatives are likely to face in liquidating shares after the owner passes on”.

I was somewhat taken aback by this take, as in my naive and financially illiterate opinion, I expected the executive to encourage broader participation in share trading as a means to infuse liquidity in the NSX.

This, in my view, would be an antidote to the purported lack of liquidity, unlike discouraging participation, which would perpetuate the lack of liquidity.

On another occasion early this year during an annual general meeting (AGM) of one of the companies that made an initial public offering (IPO), I was again taken aback by the questions raised by the shareholders.

Rather than query the financial report and strategic investment plans presented to the AGM, shareholders were asking board members how to increase their shareholding and why they received such paltry dividends if the company made such huge profits.

These were obviously new shareholders who bought the IPOs with little to no understanding of how the stock market works.

While shareholders were posing questions about buying (or selling) shares to the board and the AGM, no shares have been up for sale for the same company since October 2023, other than a single seller who was selling for a price way above the market price.

Clearly this incongruence is only attributable to mere ignorance on the part of the new shareholders. An obvious need for thorough information sharing and wider public education for a new class of participants in the stock market who enthusiastically bought IPOs and became shareholders, including prospective shareholders, thus exists.

Such an educational drive cannot be the responsibility of company boards or of the NSX.

Securities companies need to take the initiative and inform shareholders to open money market accounts and actively trade their newly acquired shares by buying additional shares, selling their shares, or acquiring shares in other companies listed on the NSX which did not issue IPOs.

Jack Kambatuku