NSE outperforms African bourses

The Nairobi Stock Exchange has outpaced its peers in Africa, positioning Kenya as a preferred investment destination.

The bourse recorded strong growth for the first half of the year, a recovery after past years of reduced activity.

“The equities and bond markets have recorded robust growth due to positive interim results and expected strong economic recovery,” said Mr Eddy Njoroge, the chairman of Nairobi Stock Exchange (NSE).

The NSE equity turnover since the beginning of the year grew to Sh61 billion, almost double the annual equity turnover in 2009, which was Sh38 billion.

Analysts say the improved performance is due to growth of the bond market which has witnessed a threefold increase on its turnover, which topped Sh338 billion by last month.

The entire bond turnover for 2009 was Sh110 billion.

The NSE 20 Share Index has also gone up by 37 per cent outperforming other major stock markets such as in Nigeria, Ghana and South Africa which grew by 24.7 per cent, 14.75 per cent and 2.49 per cent respectively.

Wider representation of key sectors in the bourse and robust counters especially from Kenya’s financial sector which saw minimal effects of the global banking crisis has also lifted the stock market.

“Nigeria’s stock exchange is still smarting from the banking crisis which forced the Central Bank of Nigeria to rescue the troubled banks which accounts for huge proportion of trading, Ghana’s equities market is still small and thin while South Africa’ stock exchange is yet to recover from the effects of the global financial crisis due to its strong linkage,” said Mr Edwin Nyaducha, a managing principal of Inkubate, a corporate finance and business advisory firm.

The capital market is expected to continue recording improvement as the new constitution comes into effect.

“The vote is an upside for the socio-economic environment and signals a brighter future for the local economy and the exchange,” said Mr Njoroge while presiding over the listing of the KCB Bank Rights Issue shares at the Nairobi bourse.

Increased borrowing

The stock exchange is riding on the increased borrowing appetite from the public as businesses shy away from banks loans.

“The focus on domestic fund raising initiatives is critical as it not only prove the ability to tap resources, but acts as a barometer of level of maturity to potential investors especially for foreign direct investment,” said Mr Amish Gupta, an investment banker with Standard Investment Bank.

The strong performance of NSE is a pointer to the resurgence of equities markets in Africa as it is viewed by investors as one of the strong emerging markets.