The United Nations Conference on Trade and Development report on Kenya’s investment policy 2013 indicates that the investors increased their shareholding in foreign stocks from $163 million (Sh14 billion) to $306 million (Sh26.3 billion) between 2006 and 2010.
The report says that most of these foreign outflows are for stocks in the Uganda, Tanzania and Rwanda.
“The main investments from Kenya have been in the banking sector, retail stores, the cement industry and marketing. East African Community (EAC) countries are the main destinations for Kenyan investments,” says the report.
Kenyan investors’ interest in bourses of neighbouring countries started as a spill over from the 2006 KenGen initial public offering (IPO) at the Nairobi Securities Exchange (NSE) that drew in hundreds of thousands of first-time stock market participants.
Robert Baldwin, chief executive of Crested Securities, a Ugandan brokerage, said that investment in the Uganda Securities Exchange has been both by retail and institutional buyers.
“Most retail investors came into the market in 2007 during the Stanbic Bank IPO,” said Mr Baldwin.
Kenyans accounted for about half of the investors who bought into the IPO that was oversubscribed by 200 per cent. Institutional investors were more aggressive in last year’s Umeme IPO, he added.
Shares of Rwanda’s Bralirwa and Bank de Kigali, which were listed through IPOs, have also been favourites among Kenyan investors.
The survey also found that more retail and institutional investors would buy into Uganda, Tanzanian and Rwanda companies if the exchanges were linked to allow for seamless trading, which affects liquidity of the stocks.
Kestrel Capital chief executive Andre DeSimone said that liquidity in neighbouring exchanges is, however, too low to attract institutional investors who buy and sell in large tranches. “You are lucky if the market trades $100,000 (Sh8.5 million) when in Kenya the daily average is $5 million (Sh425 million),” said Mr DeSimone.
The East African Securities Regulatory Authorities (EASRA), has proposed interlinking the exchanges to allow for seamless trading across member exchanges and to stimulate cross-border trade. “Due to the lack of a common trading, clearing, settlement and depository infrastructure, there has been minimal trading in cross-listed securities,” said EASRA chair Japheth Katto in October last year.
EASRA has also proposed floating of IPOs and other offers in local currencies and treating citizens of all member states equally as a way of promoting cross-border deals.
The report also listed Kenyan firms that have gone regional as evidence of the increasing cross-border linkages, including oil marketer KenolKobil which has expanded to the Democratic Republic of Congo, Mozambique and Zambia.
