Capital Markets

Nairobi, Johannesburg stock markets to cross-list securities

NSE

A client monitors trading on the Nairobi Securities Exchange’s electronic board. PHOTO | FILE |

The Nairobi and South African bourses are set to launch dual-listing of collective investment funds in the coming months, an official of the Johannesburg Stock Exchange (JSE) told the Business Daily.

The listing will focus on exchange traded funds (ETFs)—modelled on unit trusts—at beginning based on the most liquid stocks, principally on the FTSE NSE Index series launched in 2011.

Tamsin Freemantle, the business development manager at the JSE, said the two bourses will also explore dual listing of individual equity stocks and bonds. The NSE plans to launch the ETF rules in July this year, setting the stage for their listing on the local bourse and there after at the JSE.

“ETFs are good for retail investors in both markets as they ensure diversification, liquidity and risk mitigation. We are likely to start with equity ETFs and we have started discussions with potential issuers,” he said.

In South Africa, where there are 44 ETFs, the issuers of the products are normally banks in conjunction with fund managers. Locally, the FTSE NSE Kenya 15 Index reflects the performance of the 15 largest stocks listed on the Nairobi exchange. The stocks are ranked by full market capitalisation as shown by the trading on the NSE.

The second index is the FTSE NSE Kenya 25 Index, which is based on the performance of the 25 most liquid stocks trading on the Nairobi exchange.

Both indices were launched in November 2011, but a third index, the FTSE NSE Kenya Government Bond Index, was introduced in October the following year. Ms Freemantle was in Nairobi last week for talks with the NSE and the Capital Markets Authority on the joint dual listing project.

She said the JSE and the NSE had held discussions with banks and fund managers who manage the ETFs issuance.

In Johannesburg, the ETFs range from those specialising in dividend-paying stocks to those on commodities. Cross-listing of individual equities is expected to be done in the long term. The JSE has 88 dual-listed firms, but none is Kenyan. Also, no South African company has cross-listed on the NSE.

Ms Freemantle said the advantages of being listed on the JSE include ability to raise cash from more investors and a bigger market. The JSE has over 390 companies with market capitalisation of over $1 trillion (Sh96 trillion) compared to Kenya’s $25 billion (Sh2.4 trillion).

“Cost of listing on the JSE is half of those of listing on the London Stock Exchange,” said Ms Freemantle.

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