Equities

Kenyan Bourse Targets 5 New Listings, Index Up 24% in 2023

Nairobi Securities Exchange targets five new listings in 2023 as all-share index rebounds 24% after 28% fall in 2023.

By Athena Xu

6/10, 02:45 EDT
article-main-img

Key Takeaway

  • The Nairobi Securities Exchange (NSE) aims for its first listings since 2020, targeting five new debuts including REITs and ETFs.
  • NSE's all-share index rebounded 24% in 2023, driven by funds shifting from Treasury bills and bonds as yields peak.
  • NSE plans to boost retail investor participation to 40% by halving trading fees, shortening settlement cycles, and introducing fractional investing.

Nairobi Securities Exchange Targets New Listings

The Nairobi Securities Exchange (NSE) is aiming to secure its first stock listing since 2020, driven by a rebound in shares after a two-year decline that saw the main index lose over 50%. Frank Mwiti, the newly appointed CEO of the NSE, stated that the bourse is targeting at least five trading debuts this year, including real estate investment trusts (REITs), exchange-traded funds (ETFs), and equity offerings. The exchange is currently in discussions with several potential issuers, including private equity funds and family-owned businesses.

Mwiti emphasized the need for quality issues rather than demand, saying, “We don’t have a demand issue — what we need is quality issues and the market is there.” He also mentioned that the exchange is in talks with the government regarding the privatization of state-owned enterprises and is urging publicly traded companies to list bond issues on the exchange. Other plans include cross-listing several structured products on various African bourses, potentially including Ethiopia.

Stocks Rebounding

The NSE all-share index, which fell 28% in 2023, has rebounded and is now Africa’s second-best performing gauge this year, up 24%. This rally has been fueled by funds flowing back to equities from Treasury bills and bonds as yields hit their peak and the acceptance rate for bids drops. Other contributing factors include bets that the Federal Reserve will begin cutting its interest rate, improved availability of dollars, and the alleviation of investor fears over the settlement of a Eurobond maturing this month.

Eric Musau, executive director of research at Nairobi-based Standard Investment Bank, noted, “Certainly there’s additional activity, and if interest rates can start to come off at some point in the future, then that will provide the impetus for listings in the market.” He added that the targets for REITs are realistic, given the robust pipeline, and that there are ETFs currently being worked on.

Expanding Retail Investor Participation

The NSE aims to expand retail investors’ participation in the markets to as much as 40% from the current less than 10%, according to Mwiti. Strategies to achieve this include halving trading fees, currently around 2%, shortening the settlement cycle, providing easier access through mobile phones, and introducing fractional investing to make it affordable for those with fewer funds.

Mwiti highlighted the importance of retail investors, stating, “We obviously need to have a very intentional approach for the retail segment. This market cannot be vibrant, healthy, deep, and liquid without retail investors.” The exchange plans to partner with telecommunications companies, credit unions, and banks to boost retail investor participation as it plans ahead for 2025-2030.

Street Views

  • Eric Musau, Standard Investment Bank (Cautiously Optimistic on the Nairobi Securities Exchange):

    "Certainly there’s additional activity, and if interest rates can start to come off at some point in the future, then that will provide the impetus for listings in the market."

  • Eric Musau, Standard Investment Bank (Bullish on REITs):

    "The targets are realistic, especially on the REITs. On the REITs side you have a robust pipeline and, for ETFs, I know there are ETFs being worked on."

Management Quotes

  • Frank Mwiti, CEO of Nairobi Securities Exchange:

    "We don’t have a demand issue — what we need is quality issues and the market is there. For the private sector, we will have listings this year. For privatization, it’s really dependent on the legal issues being resolved."
    "Certainly there’s additional activity... This market cannot be vibrant, healthy, deep and liquid without retail investors."