Capital market players agree joint deal to boost product uptake at NSE

Capital markets stakeholders have agreed on a joint strategy to ensure that products are well packaged to meet expectations of issuers and investors.

The concerted efforts are aimed at enhancing the listing and uptake of the capital markets products at the bourse.

In a joint statement on Tuesday, Capital Markets Authorities chief executive Paul Muthaura, said they had agreed to come together as an industry to inform a refined strategy.

The strategy incorporates the Treasury, the Nairobi Securities Exchange, the Central Depository and Settlement Corporation (CDSC), as well as the Fund Managers Association (FMA).

Other parties are the Kenya Association of Stockbrokers and Investment Banks (KASIB), licensed market intermediaries, and the East African Venture Capital Association.

'Low uptake'

Mr Muthaura said by coming together, they would benefit from broad ownership of all stakeholders and ensure value proposition of listing on the NSE and new capital markets products.

Capital markets products include equities, bonds, loans stocks and preference shares, private equity funds, real estate investment trust (reits) among others.

“The Capital Market Master Plan set down a clear target of achieving three to four GEMS listing annually, but this target has not been achieved despite concerted industry efforts.

"New products have also been introduced with low uptake witnessed,” said Mr Muthaura.

NSE chief executive Geoffrey Odundo said a proposal to introduce an incubator board –- a team to oversee new products -- would assist issuing entities to make their product offerings attractive to investors.

“It is expected that this board shall host those entities that require restructuring in terms of financial, technical, operational, commercial, strategic, governance, environmental, legal, compliance, policies, procedures and other aspects to move them to the accelerator board,” said Mr Odundo.

He said the visibility, or attractiveness of the products, would allow capital market stakeholders to engage with the issuing entities for the mutual benefit of all parties.

CMA study

The initiative comes on the back of a recent study conducted by CMA in the last quarter that raised concern over the low number of listings and a low uptake of capital markets products.

Factors affecting low product uptake include a reluctance to implement innovative products and failure to attract large private and public potential issuers to list at the NSE.

The perception that other regulatory barriers still override the relatively lower cost of raising funds through the capital markets -- compared with bank lending rates -- are also to blame.

Theer is also the adverse macroeconomic environment and emerging competition from other quick return investments such as real estate, mobile money products and betting.

Others are reputational risk exposure for potential issuers to post-offer or listing price correction following professional valuation, and the absence of a clear action plan towards compensation or restitution of bond investors whose funds remained locked in Chase and Imperial Banks, which has dampened the confidence specifically in the corporate bond market.