NSE bets on waiver to excite local investors
Nairobi Securities Exchange (NSE) has begun a campaign to rev up local investors and spur liquidity at the bourse, on the back of slow activities, which includes exit of foreign investors to other markets as the country approaches an electioneering period.
To stir activities at the bourse, Chief Executive Geoffrey Odundo has waived daytime trading fees for the next 30 days. The bourse will also provide real time data for the investors to enable them make quick decisions on prices.
“To make this more exciting, we are today announcing that for a period of one month, we are giving a waiver on fees to increase activation,” Odundo said.
The move, is meant to balance the imbalance between local and foreign investors. Foreign investors control 48 per cent of the bourse as opposed to 42 per cent by the local shareholders.
NSE intends to cushion the bourse from the risks of foreign investors who may be selling their assets due to concerns over global financial recession and the election.
Data shows that since 2017, portfolios held by foreign investors have been net sellers in the market except for 2019, when they were net buyers and this may persist.
“Equities turnover at the NSE fell 19 per cent in 2022 on decline in foreign investor appetite for shares. We expect this to persist. A hike in lending rates in developed markets has made their investments more attractive, coupled with the risk associated with the Kenya elections,” said AIB-AXYS Africa, an investment firm.
For foreign investors, a weaker shilling means the value of stock market investments are devalued by changes in currency exchange rates, and this does not favour them since most do not insure fully against forex risks.
“If you take a position and want to exit it on the second leg, that will be free. You will continue paying other levies but we at NSE will make it free to enhance day to day trading,” he said.
As of yesterday, day to day trading accounted for between 4.5 to 5 per cent of turnover, with the new move expected to ramp up liquidity, said Gichuru, adding that this accounts for Sh983 million.
Day trading is preferred by retail investors as they use high amounts of leverage and short term trading to capitalise on small price movements that occur in highly liquid stock currencies.
“Now you do not have to stick to a position the entire time. If you feel the market is moving in the direction you wish, you can dispose of that position, take your profit and the only position that proceeds to settlement is the open position,” said Joseph Gichuru, NSE’s infrastructure director. NSE will offer free integration and consumption of data until the end of this month.
Kevin Ngige, an equity analyst with Genghis Capital said balancing the local and foreign investors is ideal, as unlike local investors, they react to negative sentiments that distort macro policy including election, leading to capital flight. Kenyans will be going to the General Election in less than a month, with growing uncertainty clouding foreign investment flows.
“In most cases this leads to the shares falling, because the locals don’t have capacity to absorb them,” said Ngige.
However, Odundo sought to downplay the election card, drawing from the 2013 and 2017 lessons when turnovers were low before the elections but picked up immediately after in both instances.