Kenyan firms can now sell shares in other countries without cross-listing after the the Capital Markets Authority (CMA) approved global depository receipts (GDRs) rules.
International companies will also be able to sell shares in Kenya without listing on the Nairobi Securities Exchange (NSE) #ticker:NSE through the new product introduced by the regulator.
Depository receipts are tradable certificates issued in one country representing shareholding in a company listed in another.
Corporate bonds can also be traded under the same arrangement in what is called depository notes.
“In order to deepen and develop the capital markets through innovative products, the board of Capital Markets Authority has approved a Policy Guidance Note for the listing and trading of global depositary receipts and notes,” the CMA said in a statement yesterday.
Raising finances has been a drawback in the country due to previously high interest rates charged by commercial banks and stringent collateral requirements.
Cross-listing has been a headache for Kenyan companies due to the strenuous process involved and inactivity in other regional markets. The new framework is expected to remove this bottleneck by enabling investors on both sides to directly trade stocks listed on one another’s market.
CMA chief executive Paul Muthaura said the new products are expected to promote Kenya as an attractive investment destination by providing a means for international investors to familiarise themselves with local companies that may issue GDRs and GDNs in other markets and create opportunities for international entities to raise capital in Kenya.
“As a result of their inherent characteristic of representing securities issued in another country, GDRs/GDNs also eliminate the cost and complexity of establishing custody arrangements in multiple countries,” it said.
Mr Muthaura added that in the case of GDNs, debt issued in foreign markets and depositary notes in Kenya would be denominated in the Kenya shilling, thus eliminating currency risk for the investors.