Capital Markets

New Africa exchange link eases foreign stake buying


Nairobi Stock Exchange (NSE) Chief Executive Geoffrey Odundo. NMG PHOTO

Kenyans can now buy shares of companies listed on 13 other African markets through their local stockbroker after a platform linking multiple exchanges was unveiled yesterday.

The African Exchanges Linkage Project (AELP) has connected seven exchanges across 14 African countries including Morocco, Egypt, Nigeria, Kenya, Mauritius, and South Africa.

Others are Benin, Burkina Faso, Cote d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo.

“The AELP project has launched an e-platform, enabling seamless cross-border securities trading among seven African stock exchanges representing 2,000 companies with roughly $1.5 trillion market capitalisation,” the African Securities Exchange Association said in a statement.

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“The AELP Link Trading Platform incorporates stock market integration, an order routing system, and market and order-book data sharing.”

Kenya’s Nairobi Securities Exchange (NSE) is part of the initiative that is backed by the African Development Bank.

Mr Geoffrey Odundo, the chief executive of NSE, told Business Daily that the cross-border trades will initially be handled by market intermediaries on both sides.

“You will issue trading orders to your broker who will route the trades to the broker in the other market,” Mr Odundo said, noting that transaction charges by the respective market intermediaries will apply.

One will also need to have opened a securities account in the foreign market, with such a process expected to rely on the know-your-customer (KYC) details already present with the Nairobi-based broker.

Mr Odundo said the platform is separate from the existing online trading system, which allows clients to trade NSE-listed stocks directly without relaying instructions to brokers.

He added that automating the cross-border trades to achieve the same level of convenience as the NSE platform is a near-term objective of the AELP.

Linking the exchanges reduces the complications and hassle of investing in foreign markets, opening additional investment opportunities for Kenyan investors.

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Most local investors have no foreign equities investments, denying them the benefits of geographical diversification besides access to unique opportunities in other markets.

Most of the continent’s biggest and most successful companies are based and listed in South Africa. They include Naspers, Anglo American Platinum, First Rand, MTN Group, Standard Bank and Vodacom Group.

Kenya’s Safaricom, listed on the NSE, is also among Africa’s largest firms. Others are Nigeria’s Dangote Cement and Maroc Telecom of Morocco.

The Pan African trading platform could also benefit the local bourse by attracting new investors from other African countries seeking exposure to Kenya’s equities.

Currently, foreign investments on the NSE largely represent major funds and asset managers primarily owned by clients in Europe and the Americas.

They include BlackRock, Fidelity, Norges Bank Investment Management, Wellington Management and JPMorgan Asset Management.

The linking of the African exchanges could in the future also help companies raise capital in multiple markets.

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