Columnists

Stock exchange stays resilient in face of turbulent economic times

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Nairobi Securities Exchange. FILE PHOTO | DIANA NGILA | NMG

Kenya has always emerged as the regional hub of opportunity in Africa, drawing in investors with its robust economy and capital markets. At the heart of Kenya’s economic and investment ecosystem is the Nairobi Securities Exchange (NSE).

The NSE is the leading financial markets infrastructure Group that facilitates efficient financial market transactions in the region.

In 2014, following a successful IPO, the Nairobi Securities Exchange (NSE) demutualized and became listed on the main board of its own exchange.

This critical move enhanced corporate governance, transparency and accountability, and formed a significant step in the evolution of the Kenyan capital markets.

In a recent press release, the NSE highlighted the thriving aspects of the Kenyan public capital markets, dispelling any misconceptions and emphasising their strengths.

Kenyan listed companies have continued to deliver remarkable performance despite the persistent influence of macroeconomic factors.

With annual earnings growing at an impressive rate of 19 percent over the last three years and revenues increasing at an 11 percent annual rate, these companies’ financial stability increases investor confidence and dividend earnings.

In their August 2023 review, Morgan Stanley Capital International (MSCI) noted that the market dividend yield stood at 8.63 percent, significantly outperforming the peer average group of stock exchanges in the MSCI Frontier Markets Index, which had a yield of 4.28 percent.

Despite the macroeconomic headwinds both domestically and internationally, Kenya’s capital markets have remained resilient. The recent volatility in global equity markets has not deterred Kenya’s resilience. In the first half of 2023, cumulative equity market activity witnessed an incredible 9 percent increase compared to the previous year.

The US Federal Reserve’s rate hikes have prompted a flight of dollars from developing markets like Kenya, affecting currency values. Despite recent foreign outflows, the role of foreign investment inflows and outflows serves as key indicators of the economy's attractiveness.

Commendably, Kenya’s capital markets are embracing technology-driven strategies like the CBK DhowCSD, the Dosikaa app which increases market accessibility; and exploring the potential of a 24-hour market operation with minimal Know Your Customer (KYC) requirements.

Investor protection remains important, with proposals to increase the Investor Compensation Fund’s maximum pay-out and expand the contributor base.

The writer is a Technical Services Associate at the Kenya Association of Stockbrokers and Investment Banks.