FTSE indices put Nairobi bourse on international radar
Posted Wednesday, November 9 2011 at 00:00
International investors will track performance of the Nairobi bourse through two FTSE NSE Kenya indices launched yesterday, exposing the stock market to a wider pool of foreign investors.
Safaricom, Equity Bank, East African Breweries Limited, Kenya Commercial Bank, Barclays Kenya and 20 other stocks were selected to form the FTSE NSE Kenya 15 Index and the FTSE NSE Kenya 25 Index.
The indices put Nairobi Securities Exchange (NSE) on the radar of savvy international investors whose decisions are mainly guided by shifts in economic fundamentals.
Chief executive officer of NSE, Peter Mwangi, said the indices had been developed jointly with FTSE International in consultation with local investors and fund managers.
He said that the two indices, which will initially make up the FTSE NSE Kenya Index Series emphasize transparency, tradability and strong governance of the Nairobi bourse.
The indices data will be available internationally through global vendor platforms.
“They reflect the growing interest in new domestic investment and diversification opportunities in Kenya and will act as a gauge by which our investors can measure the performance of their portfolios,” said Mr Mwangi at the launch. He added that the two indices will lay a foundation for the development of index related products such as Exchange Traded Funds (ETF) and run concurrently with the NSE 20-Share and NSE All-Share Indices.
Legislation to govern new products such as ETFs and REITs is pending with the Capital Markets Authority, which is also setting up a futures exchange where currencies and derivatives are expected to be traded.
The FTSE NSE Kenya 15 Index will track the performance of the largest 15 stocks ranked by full market capitalisation while the FTSE NSE Kenya 25 Index will track the performance of the 25 most liquid stocks. The East African Breweries, KCB, Barclays, Safaricom and Equity which had the highest market capitalisation as at the end of September make up 71.91 per cent of the FTSE NSE Kenya 15 Index.
Shares of the five companies, which are also heavily traded by foreign investors, also make up 69.19 per cent of FTSE NSE Kenya 25 Index meaning that they would be the most visible in the two new indices which will be re-evaluated every six months. Jonathan Cooper, managing director for FTSE Group Middle East and Africa, said that the new indices would help provide information to foreign and local investors.
“With the indices and the screening it means that they (the equities) are investable and this is what makes them suitable for the creation of other financial products for example exchange traded funds and mutual funds,” said Mr Cooper.
He said that one of the main challenges that foreign investors were facing when they wanted to invest in equities listed in emerging or frontier markets is their in-accessibility. The initiative with FTSE International is the third in Africa after similar partnerships with the Johannesburg and Casablanca Stock Exchanges.
Mr Cooper said that FTSE, which has partnered with more than 20 exchanges worldwide and calculates over 150,000 indices was “in discussions with other key exchanges in Africa,” adding that details would emerge at the end of this year or the beginning of next year.