NAIROBI, Kenya, Aug 22 – The Capital Markets Authority wants increased activity on the Nairobi Stock Exchange to stimulate vibrancy at the bourse.
CMA Chairman Kung’u Gatabaki believes bringing more players to the stock exchange will unlock the vast potential that exists in mobilising resources via the capital markets.
The CMA is currently working on a number of initiatives geared towards upping the activity on the NSE.
Mr Gatabaki said regulations for the establishment of a Small and Medium Enterprises segment at the Nairobi Stock Exchange will be complete by October, paving way for their listing.
“We have reached an advanced stage and by October we would be able to talk of having SMEs trading on the Nairobi Stock Exchange,” Mr Gatabaki said.
Currently the NSE has two segments – the Main Investment Market Segment and Alternative Investment Market Segment – whose tough listing requirements have locked out many small companies.
This limited activity by the current players is said to be a major factor in the slipping of NSE 20 share index from the highs it enjoyed last year amidst economic shocks.
Last year, the NSE proved an ideal hunting ground for investors who were able reap returns of their investments.
The NSE’s 20-share index gained 35 percent in 2010 as trading at the bourse remained bullish.
Fast forward to 2011, and effects of inflation, drought, high oil prices and political uncertainty seem to be eroding those gains. Since January, the NSE 20 share index has dropped 16.39 percent from 4465 points to 3733 points as of June 2011.
Mr Gatabaki says the regulator is also exploring ways of developing products for listing at the bourse with the Real Estate Investment Trusts (Reits) being in the works.
“We are undertaking a product development initiative in the market, which would be driven strictly by the regulatory board,” he said promising to work with market players on how best to support the innovation for a particular product or service to be introduced.
The CMA is also petitioning stockbrokers and market intermediaries to support demutualisation arguing it would instill corporate governance and enhance transparency in the operations of local capital markets boosting investor confidence.
“We would like to encourage the main players to see beyond what has been happening to them in the past. Time has come to ensure transparency and openness at the Nairobi Stock Exchange,” he said.