Kenyan stocks are gaining this year thanks to the emerging global recovery, and if the rally is sustained in the months ahead it could spur new listings, the CEO of the Nairobi Stock Exchange (NSE) said on Friday.
NSE's main index of 20 shares, NSE-20, has gained more than 400 points, or nearly 12 percent, since the beginning of this year. It closed Thursday's session at 3,628.53 points, while the market's bonds segment has maintained last year's momentum.
"On the equities side, all the indicators are going upwards, foreign investor participation is quite strong. Local institutional investors have come back to the market," Peter Mwangi told Reuters. "My own view is that 2010 will be a much better year than '09 both for equities and for bonds." He attributed the expectations on improving investor sentiments after global markets pared most of their financial crisis-induced losses in the course of last year.
"There is an argument that you need to get in now because even this market will recover further. There is some upside and investors are positioning themselves to take advantage of that upside," he said. Like other stock markets around the world, the NSE suffered in the wake of the financial crisis in 2008. The crisis sent market capitalisation and volumes sharply down. The NSE-20 sank 35 percent during that year.
The index and capitalisation fared better in 2009, shedding 8 percent and 3 percent respectively, but traded volumes plunged by 46 percent. Mwangi cited the price of the biggest company by market capitalisation and number of shares on the bourse, telecoms firm Safaricom, as another sign of improving fortunes.
"Psychologically it is important for our investors," he said, referring to the fact that Safaricom shares have risen above their offer price of 5.00 shillings. He said the rally and an ongoing privatisation round of a host of government-owned enterprises could spur new listings after they dried up in the wake of the financial crisis and the subsequent downturn. He said the NSE was likely to launch trading services through mobile phones and over the Internet this year, which would make it easier for investors to buy or sell shares.
"It is the investment banks and the brokers who will provide that service to their clients. It's a good development for the market because it gives more control to the investor," he said. Various measures aimed at addressing governance challenges which had hit the market in the last two years, eroding investor confidence, had been implemented, Mwangi said.
The measures include additional capitalisation for brokerages and investments banks as well as regular publication of trading results. "The other thing they needed to do was to strengthen their systems and we have received proposals from suppliers of broker back office systems," he said. "Maybe in the first half of this year we should have that system installed in their back offices."
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