Market News

Jitters double derivatives trade in Q1

Nairobi Securities Exchange
A staff member at the at Nairobi Securities Exchange. FILE PHOTO | NMG 

The derivatives market (NEXT) at the Nairobi Securities Exchange (NSE) transacted the highest ever quarterly turnover in the first three months of this year — signalling the uncertainty that necessitated more hedging.

The value stood at Sh15.5 million, exceeding the amount transacted in the period to last December that stood at Sh7.68 million. In the first three months after the launch in July last year, the counter saw total transactions of Sh13.06 million.

The number of contracts clinched also increased during the three months to March 31 compared to the quarter ending last December.

“The derivative market registered a 47.32 percent increase in trading to 302 contracts traded in Q1 2020 from 205 contracts traded in Q4 2019,” said the Capital Markets Authority (CMA) in its latest quarterly report.

Faida Investment Bank equities trader Felix Ochieng’ said the uncertainty that came with the spread of Covid-19 forced investors to hedge against the rising risks.


“Generally, in Q1 the market became quite volatile on the emergence of Covid-19, the previous quarter (4Q19) had been more predictable and positive as investors took informed positions on the market. The derivatives market provided a hedging tool which most investors highly needed when the spot market took a negative turn,” said Mr Ochieng’.

Derivatives for KCB Group #ticker:KCB and Safaricom #ticker:SCOM shares had the highest turnover during the period.

“KCB Group was the most liquid counter with 138 contracts representing a turnover of Sh6.63 million. Safaricom came in second with 47 contracts at a total turnover of 2.31 million followed by 47 Equity Bank #ticker:EQTY contracts traded at a total turnover of Sh2.23 million,” said the CMA.

“Twenty-five Barclays Bank #ticker:ABSA contracts traded at Sh0.32 million. British American Tobacco #ticker:BAT came in last having joined the derivatives market in November 2019, 3 contracts were traded which amounted to 0.13 million. The NSE 25-Share index contract traded 10 contracts at a total turnover of 3.91 million.”

Currently, only Safaricom, KCB, Equity, Barclays, BAT, EABL #ticker:EABL and NSE 25-share index are traded on the derivatives market.

The NSE established NEXT to facilitate the trading of futures contracts in the Kenyan market as a result of increased integration of the Kenyan financial markets with international markets.