Capital Markets
From The Report: Kenya 2018
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The market entered 2018 on the back of strong performance the previous year, in which the main index followed a broadly positive trajectory that continued into the first quarter. Though the markets saw some fluctuation over the following months, continuing legislative support and positive sector developments suggest a resilience going forward. At the same time, continuing regulatory support and a project pipeline that includes the continued launch of financial derivatives for equities, bonds and currencies, as well as the expansion of commodity derivatives, ensure the market will remain a driver in the region. This chapter contains interviews with Geoffrey Odundo, CEO, Nairobi Securities Exchange; and Geoffrey Gangla, CEO, Genghis Capital.

Articles from this Chapter

Overview

Regional linchpin: New investment products and continuing regulatory support ensure the bourse remains at the forefront of the continent
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Kenya’s stock exchange has played a vital role in the expansion of the nation’s economy for six decades. In terms of market capitalisation, it is the leading bourse in the East African region. As well as being a founding member of the African Securities Exchanges Association and the East African Securities Exchanges Association (EASEA), the bourse was promoted from affiliate to full member of the World Federation of Exchanges (WFE) in February 2018. This came after a number of important developments…

Interview

Dynamic development: Geoffrey Odundo, CEO, Nairobi Securities Exchange (NSE), on product diversification and local participation
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Interview :Geoffrey Odundo What are the impacts of monetary policy on the performance of the stock exchange? GEOFFREY ODUNDO: The bourse has established a number of tax incentives to stimulate participation in the market. For instance, our exchange does not enforce a tax on capital gains realised from share sales, and we are advocating for additional benefits that will encourage more firms to list. The activity at the NSE is driven by not only incentives and product availability, but also…

Analysis

In on the fund: Market sees strong early uptake of exchange-traded funds
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For many years Kenya’s interaction with the global exchange-traded fund (ETF) arena was a passive one. The nation’s reputation as a lively frontier market meant that it was frequently a component of foreign-based ETFs which targeted global investors with an interest in the potentially higher returns of emerging markets. For instance, in the US, the PowerShares Frontier Markets Portfolio, VanEck Vectors Africa Index and Columbia Beyond BRICs ETF position Kenya within the top-10 countries they…

Interview

Changing the rules: Geoffrey Gangla, CEO, Genghis Capital, on the strategies that are revamping and reinforcing the role of the capital markets
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Interview :Geoffrey Gangla What factors will be driving the performance of Nairobi Stock Exchange (NSE) in the coming year? GEOFFREY GANGLA: Overall market sentiment is looking favourable after the easing of political tensions, and more activity is expected. In 2018 increased public and private spending as a result of improved investor confidence will have a noticeable impact on economy activity. Various government-led infrastructure investments made between 2013 and 2018 will start to materialise…

Analysis

REIT on time: Real estate investment trusts (REITs)
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The STANLIB Fahari I-REIT (FAHR) is the only listed REIT on the Nairobi Securities Exchange (NSE). FAHR is an income REIT (I-REIT), which is a type of REIT that owns and manages income-generating real estate for the benefit of its shareholders. I-REITs are required to distribute at least 80% of their income as dividends. With the listing of FAHR, Kenya became the fourth African country to have a listed REIT, after South Africa, Ghana and Nigeria. South Africa has the largest number of listed REITs, at 31 with a market capitalisation of R422bn ($32.9m) as of November 2017. The other countries have between one and three listed REITs on their respective…

Analysis

Grading on a curve: Fixed-income securities
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Fixed income was billed as an attractive asset class in the capped-interest-rate era. This seems to be borne out by the fact that commercial banks increased their holdings of domestic debt by the equivalent of 2.23% of GDP in 2017, intensifying their grip on safer asset classes in lieu of riskier credit lending. Commercial banks accounted for 49.17%, or KSh947.8bn ($9.3bn), of domestic debt at end-2016; this increased to 50.67%, or KSh2.22trn ($21.6bn), by end-2017. This trend was further reflected in the dip in private sector credit growth, which closed 2017 at 2.4%, down from 18% over the preceding two years. Secondary market turnover, meanwhile,…

Analysis

Bearing resemblance: Kenyan equities benchmarked against the region and the world
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Election years are perceived by many as disruptive of day-to-day life, and 2017 was no exception for Kenya, which experienced an impact on the equity market and the economy at large in light of its vote that year. Nonetheless, despite election jitters, the Nairobi Securities Exchange (NSE) All Share Index hit 24.5% in 2017. The NSE 20 and the NSE 25 also closed the year at levels that were commendable given the circumstances. By comparison, the Kenyan equities markets have been depressed year-to-date (YTD), with the NSE All Share Index at -12.9%, as of September 2018. This contravened investor expectations given the impressive performance recorded…