Capital Markets

Broker goes online to offer traders offshore portfolios

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A stockbroker at the Nairobi Securities Exchange trading floor. FILE PHOTO | NMG

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Summary

  • Sterling Capital has signed a deal with licensed online forex broker EGM Securities, to tap into global stocks, as well as other asset classes such as indices and commodities like gold and oil.
  • The investment bank with exposures to equities and fixed income trading in the Nairobi Securities Exchange (NSE) is looking to diversify portfolio for clients by gaining access to global markets.
  • Kenyans are increasingly gaining knowledge of opportunities abroad whose returns surpass the traditional asset classes like land speculation, stocks and government bonds.

Sterling Capital has signed a deal with licensed online forex broker EGM Securities, to tap into global stocks, as well as other asset classes such as indices and commodities like gold and oil.

The investment bank with exposures to equities and fixed income trading in the Nairobi Securities Exchange (NSE) is looking to diversify portfolio for clients by gaining access to global markets.

Kenyans are increasingly gaining knowledge of opportunities abroad whose returns surpass the traditional asset classes like land speculation, stocks and government bonds.

However, getting access to foreign markets is a complex process but a recent surge by foreign players setting up subsidiaries in Nairobi is opening a new frontier for investors and local brokers.

“The global markets provide Kenyans with great trading opportunities for investment returns. The global economic recovery is driving oil demand which is expected to gain momentum. Organisation of Petroleum Exporting Countries (Opec) forecasts oil consumption to increase by roughly five percent in the second half of 2021 as the world emerges from the pandemic slump,” Samwel Kiraka, CEO of EGM Securities, a subsidiary of Equiti Group, said.

The partnership shows a trend of investments firms partnering with global online forex dealers diversify from traditional asset classes available in Kenya with offshore exposures.

CMA has licensed EGM Securities Ltd (trading as FXPesa), SCFM Ltd (trading as Scope Markets), Pepperstone Markets Kenya Limited, Standard Investment Bank (SIB) and Exinity Capital East Africa Limited as non-dealing online foreign exchange brokers.

SIB which has been in operation for 25 years as an investment bank acquired a licence in 2018 to operate MansaX fund which invests in online foreign exchange and offshore commodities.

While online forex offers high returns, it is usually a very risky business with ability of making huge losses. SIB fund says it has leveraged forex with commodities, precious metals, cash and hedged with derivatives as a diversified strategy.

The regulator expects the brokers to deal only with sophisticated clients, chose and manage investments prudently for its online forex trading clients and develop appropriate investment strategies to hedge for losses.

The regulator also expects to brokers to communicates clients’ buy and sell order positions through a to meet clients’ investment goals.

By operating online, however the market is replicate with fraudulent players who have no licenses to operate.

When the Capital Markets Authority appeared in Parliament to shed light on famous con games, they said they were investigating 500 cases for losses over Sh1 billion invested in unregulated products including online forex frauds, illegally pooled funds, crypto currency, real-estate and ponzi schemes.