Why the stock market needs to be more open

Nairobi Securities Exchange (NSE) trading floor.
Nairobi Securities Exchange (NSE) trading floor. Market data helps investors make informed decisions about their money. PHOTO | DIANA NGILA  

Kenya has in the past 20 years been growing access to government services, greater incomes and more purchasing power. While millions of Kenyans have yet to benefit from our economic miracle, millions of others have indeed seen their families’ economic wellbeing improve during the period.

We thrive as the economic powerhouse in east, central, and the horn of Africa. We also hold the 63rd largest value of equity securities in the world.

However, we stand at roughly only 2.5 per cent the market capitalisation share value size of the tiny populations of Singapore or Taiwan with our gross domestic product (GDP) growth almost double theirs or the larger populated country of South Africa with our GDP growth almost triple theirs but our share value still less than 2.5 per cent theirs. Investment into our securities exchange should be more desirable due to our greater potential growth potential. But as foreign investment in the Nairobi Securities Exchange listed equities drops from 70 per cent, very few Kenyans make up the difference and investment in securities.

As a percentage of our GDP at purchasing power parity with the United States, here in Kenya we only keep 12 per cent of our economic value in our publicly traded shares while Singapore keeps a shocking 154 per cent of its GDP in its stock market, Taiwan 72 per cent, South Africa 96 per cent and the United States 129 per cent. Our securities ownership fares dismally yet as a country we hold many similarities to both Singapore and South Africa.

Kenya, Singapore and South Africa all stand as the beacons of stability in our respective regions, we garnish substantial equity, debt and real estate investments from citizens of our neighbouring countries, and we each act as regional transport hubs. An Oxford Business Group study released this year stated that only four per cent of Kenyans invest in companies listed on the Nairobi Securities Exchange despite our growing economy and burgeoning middle class. The study blamed a lack of awareness as the cause for low investment rates in equities.


So even logical teenagers could surmise: a lack of awareness means that the sector should provide more information, not less. What we do in Kenya? Yes, there are publicity campaigns by the bourse and the Capital Markets Authority. But, do logical investors need to know how stocks work or instead do they need to know as much data about the price fluctuations and listed company information as possible? Even teenagers would obviously say investors need both. But the bourse puts information behind a pay firewall.

In order to get real-time stocks and bond prices, the Nairobi Securities Exchange (NSE) charges Sh133,980 per month or a lower Sh20,000 per month just to view a live stock ticker. provides some real-time 15-minute delayed data, but even historical data gets hidden behind a pay firewall.

But such data in other countries gets provided for free. So, if you must part with a small fortune in order to get up-to-date information about your investments or get that information for free elsewhere, where would the savvy Kenyan put their hard-earned money? Overseas.

Every finance student knows the definitions of securities market efficiency. New York University’s Stern School of Business defines an efficient market as one whereby market prices are the true value of the investment without any bias in the price estimates. A market can be one of three levels of efficiency: weak form efficiency when all historical prices are available for analysis by investors and factored into current prices, semi-strong form efficiency when all public information gets factored into securities prices, and finally strong form efficiency when absolutely all information, both public and private, is available to investors to make decisions.

Sadly, in Kenya, we try to hide even weak form efficient market data so investors cannot make as informed decisions about their money as possible. Kenya does not even meet the minimal requirements of a weak form efficient market. Who then would dominate such a market? The rich and connected.

Arguably, the Capital Markets Authority must shake the securities monopoly and force the public disclosure of all real-time and historical securities data online in order to foster the uptake of securities investing by more Kenyans. Also, the regulator should force partnerships with famous online platforms for financial information, Yahoo Finance, or providers of free access information.

Kenya is conspicuously absent from the long list of countries tracked on international websites despite our stunning economic growth. We could even take a truly Kenyan approach and allow Kenyan entrepreneurs free access to the information that they can then aggregate on their own sites and earn advertising revenue by placing advertisements on their platforms.

Kenyans in the diaspora often invest in real estate back home instead of equities because in their foreign countries they are used to vast access to free stocks, bonds and derivatives information and get frustrated with information hiding behind paywalls here in Kenya.

We can and must do better. Let us create key performance indicators for the regulator containing growth in the percentage of Kenyans investing in publicly traded securities. Then the bourse can earn more by higher volumes of trades instead of seemingly milking every revenue stream possible and restricting access to even weak form efficient market data behind paywalls.


Dr Scott may be reached on [email protected] or on Twitter: @ScottProfessor