Kenyan bourse seeks to end listing drought as sentiment improves
The Nairobi Securities Exchange aims to secure its first stock listing since 2020 this year, helped by a rebound in shares after a two-year slide, which wiped more than 50% off the main index and discouraged companies from coming to market.
The bourse is targeting at least five trading debuts this year, including real estate investment trusts and exchange-traded funds as well as equity offerings, Frank Mwiti, the NSE’s newly appointed chief executive officer, said. The exchange is in talks with several potential issuers, including private equity funds and family-owned businesses.
It’s also hoping to generate fees by urging publicly traded companies to list bond issues on the exchange, and is in talks with the government on privatization of state-owned enterprises, he said in an interview June 6. Other plans include cross-listing several so-called structured products on various African bourses, including potentially Ethiopia.
“We don’t have a demand issue — what we need is quality issues and the market is there,” Mwiti said. “For the private sector, we will have listings this year. For privatization, it’s really dependent on the legal issues being resolved.”
Mwiti was previously a partner and eastern Africa markets leader for Ernst & Young. His predecessor at the exchange, Geoffrey Odundo, was in the role since 2015 until his contract ended in March.
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%. The rally has benefited from funds flowing back to equities from Treasury bills and bonds as yields hit their peak and the acceptance rate for bids drops, Mwiti said.
Other factors have helped, including bets the Federal Reserve will begin cutting its interest rate, improved availability of dollars and the allaying of investor fears over settlement of a Eurobond maturing this month, Mwiti said.
“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, executive director of research at Nairobi-based Standard Investment Bank, said by phone.
“The targets are realistic, especially on the REITs,” Musau said. “On the REITs side you have a robust pipeline and, for ETFs, I know there are ETFs being worked on.”
Planned offerings don’t always materialize, however. Last year Credit Bank Plc intended to raise 1 billion shillings ($7.7 million) on the exchange, in what would have been its first initial public offering since 2014. The operation was eventually pulled amid a declining market.
The latest stock listed by introduction on the exchange was Homeboyz Entertainment Plc back in 2020. The most recent IPO was that of the exchange itself in 2014.
The bourse intends to expand retail investors’ participation in the markets to as much as 40% from less than 10% currently, according to Mwiti.
Ways of doing that may 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 less funds.
Retail Investors
As it plans ahead for 2025-2030, the exchange intends to partner with telecommunications companies, credit unions, and banks to boost the participation of retail investors, he said.
“We obviously need to have a very intentional approach for the retail segment,” Mwiti said. “This market cannot be vibrant, healthy, deep and liquid without retail investors.”
BlackRock Inc., the world’s biggest asset manager, said earlier this year it sees an opportunity to invest in Kenyan stocks, which have gone from the world’s worst performers in 2023 to among the best this year.
