Demand for Safaricom shares is expected to remain high after it is listed, influenced by a subscription level of about 400 per cent.

At the latest available counter on Wednesday last week, applications for the 10 billion shares that were on offer had reached 38.2 billion, indicating a subscription rate of 382 per cent.

In money terms, this translates to Sh191 billion against a target of Sh50 billion that the Government hoped to raise by selling a quarter of the region's most profitable company.

It is generally held that a counter would have a good price after listing (technically known as after-market price) when the subscription level is at least 300 per cent. That leaves substantial funds floating in the market that are ploughed back into the counter or other securities in the market.

In the case of Safaricom, however, opinion is divided on the impact it will have once it starts trading on the Nairobi Stock Exchange, which currently has 15 billion shares across 54 counters.

Some analysts expect the huge volume of shares to depress not just capital gains for Safaricom, but also to cause price dips across the board. This school of thought does not expect Safaricom to reach Sh10 per share.

The shares were sold at Sh5 each except for international investors who will pay Sh5.50 per share. During the book building process, some international investors had offered to pay up to Sh6.50 for each share.

Tony Waweru of Standard Investment Bank believes the price of Safaricom shares will depend on the available free float - the number of shares that trade regularly on the market.

Traditionally, only a small number of shares are issued trade. For example, even though KenGen has over two billion shares issued, on a day-to-day-basis the number traded is small.

On Monday, 378,728 shares, or 0.02 per cent of the total issued shares standing at about 2.198 billion.

Mumias Sugar, which has over 1.5 billion shares, saw only 635,269 or about 0.04 per cent traded on Monday. If Safaricom trades only 0.05 per cent of its shares daily, there would be about 20 million shares trading, a significant volume compared to the average number of shares sold on a daily basis per counter.

Mr Waweru says that a big subscription and more interest from the market after the trading commences would keep prices high at the stock market.

"We expect heavy demand on the secondary market.

We see an opening price of around Sh7.50-9.00 and an elevation beyond that in subsequent trading," wrote Chris Munene, head of dealing at Bob Mathews Stockbrokers in a report.

He advised investors to view it as a long-term buy of up to five years at any level below Sh11.50. The report also says the market is headed for a correction from the current rising prices driven by better than expected earnings in Q1 of 2008 and speculative interest from retail and high net-worth investors.

"We expect this trend to correct itself in coming days as interest rates continue to rise; the effect of the liquidity crunch starts trickling into the market and speculators begin taking profits."

Mr Waweru explained that the recent bullish streak in the stock market was likely to continue in the Safaricom after-market trading.

"The market should remain stable when the company's shares go into the market if what we have seen recently is anything to go by," he said.

Another reason that the analysts believe the shares will have a positive impact is that IPOs are generally perceived as underpriced and, therefore, cause a rush for them after listing.

The immediate aftermarket performance for KenGen was very vibrant with prices ranging between Sh30 and Sh49 before the share finally slumped to trade at between Sh20 and Sh28. But at any rate, the share has not gone below its IPO price of Sh11.90.

On the other hand, the Kenya Airways shares which seemed to have started out badly when the company was privatised in 1996 have been on a good long-term performance with current trading at about Sh50 compared with the IPO price of Sh11.25. It has reached a high of Sh147 in the last 12 months.