NSE investor wealth up Sh370b in first quarter
Investor net worth increased by Sh370 billion between January and March 2024 as the local capital market exhibited resilience and recorded enhanced performance, supported by a strengthening shilling.
The 2024 Capital Markets Soundness Report for the first quarter says the strengthening of the Kenyan shilling against the US dollar is a major influence on the market’s performance.
The market generally witnessed low volatility of share prices for firms listed on the Nairobi Securities Exchange (NSE), improved liquidity, and a rise in foreign investors’ market share of equities trading to 60 per cent.
Recovery in the first quarter was also driven by improved investor sentiments and positive macroeconomic developments, attracting foreign investors back into the equity market and boosting their market share to 60.23 per cent.
NSE equity outflow
However, foreign investors continued to exit the NSE, resulting in a net equity outflow of Sh2.20 billion registered during the quarter. Despite these outflows, foreign participation in the equity market has attracted global institutional investors such as Blackrock, driven by recent market recovery and positive developments in Kenya’s foreign exchange market, fostering a positive outlook for the next quarter.
Speaking during the report’s release, Capital Markets Authority (CMA) CEO Wyckliffe Shamiah highlighted the Capital Markets (Alternative Investment Funds) Regulation 2023, which regulates the private pooling of funds from domestic and foreign investors. The Regulations broadly cover several areas including requirements for approval of the funds; investment conditions and restrictions; obligations and responsibilities transparency, inspections; and procedures for action in case of default,” he noted. Shamiah outlined various areas covered by the regulations, including approval requirements, investment conditions, transparency obligations, and governance structures.
The product requires a substantial investment, typically attracting institutions and high-net-worth individuals.
“AIFs can be pooled from at least two, but not more than one hundred investors, who must invest a minimum of Sh1 million. AIF funds include debt and debt-linked funds; equity and equity-linked funds; hedge funds; property funds; and infrastructure funds,” he said.
AIFs enable investors to diversify their portfolios, act as a cushion during financial crises or market volatility, and contribute to economic development by investing across sectors. They also serve as a hedge against inflation, safeguarding investors’ value.
To safeguard investors, AIFs are prohibited from public solicitation for securities subscriptions and must establish governance structures. Upon approval, clear details on investment objectives, investors, assets, and tenure must be provided.
Shamiah emphasised CMA’s commitment to partnering with stakeholders to sensitise and build capacity for participants in the AIF market segment.
Significant step
He noted that the regulations mark a significant step in growing the AIF industry in Kenya, bringing previously unregulated funds under CMA oversight while mitigating risks for retail investors.
Despite global geopolitical tensions, the global economy has shown resilience, with OECD projecting a global gross domestic product (GDP) growth of 2.9 per cent in 2024. Sub-Saharan Africa’s GDP is expected to accelerate to 3.8 per cent, although sluggish economic recovery in some countries may temper growth prospects.
