Find incentives to stop NSE’s slump
The Nairobi Stock Exchange has been experiencing a downturn that has lasted for far too long, raising questions about what needs to be done to improve its dwindling fortunes.
Matters, of course, have not been helped by the fact that a rise in US Federal Reserve rates has precipitated a flight by foreign investors who are seeking better returns in the US market.
A slump in the number of shares sold as well as a decline in their value have conspired to make the market unattractive to local investors, many of who buy stocks in small volumes, largely for speculation. The number of inactive CDSC accounts is just too large for the regulator, the Capital Markets Authority, to just sit back and wait for the days when the fortunes of the market will improve.
It is time that deliberate and proactive measures are taken to revive the market, inject fresh oomph and re-ignite interest by local investors, who can use the platform to grow both their savings and returns from dividends and share appreciation.
One of the interventions that can unlock the NSE’s potential is a new listing that will bring new firms and investors on board. In fact, if the government can come on board and offload some of its shares in various institutions with high potential for growth, this will go a long way in improving investor appetite.
Companies that have not paid dividends since the Covid pandemic, and those that have been conservative in paying, should also be challenged to end the drought so that investors can see value in the market. As it is, the amounts being paid out per share are too little to excite investors. If anything, they are driving away potential ones, thus perpetuating a vicious cycle that has made Kenya’s bourse one of the worst performing globally.
Yet, this is a trend that can be reversed if experts and government honchos put their heads together and find ways to rekindle interest. It is, notably, in the government’s interest for the market to be revived because retirees’ wealth is locked there, meaning that if the government wants to improve the quality of life of senior citizens, it will catalyse measures that can make the market vibrant.
There are, without a doubt, Kenyans at home and abroad, who are looking for new avenues to invest, especially now that Kenyans in the Diaspora are the leading source of dollar inflows. Were the government to make the bonds market at the NSE more vibrant and carry out civic education on the benefits of investing in bonds and shares, it can create a win-win arrangement that will increase investor appetite and give it a source of cash to fund its development agenda.