Trading on Stock Exchanges in Kenya
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- 29.08.2022
Trading on stock exchanges in Kenya was a new concept in the early 1950s, when Kenya was still part of the British Empire. The Nairobi Stock Exchange was founded by Francis Drummond, who approached the Kenyan finance minister Sir Ernest Vasey and officials of the London Stock Exchange for permission to start a stock exchange outside of London. The London Stock Exchange accepted this proposal and approved the Nairobi Stock Exchange as an overseas stock exchange.
Results of study on Kenyan stock exchanges
This study examined the relationship between stock market development and economic growth in Kenya. It used two key measures – trade volume and capitalization – and found that they were positively correlated with each other. Furthermore, they explained 91% of the variations in economic growth. Specifically, an increase in trade volume and capitalization caused a 0.115% increase in GDP.
The researchers also found that foreign investor participation significantly influenced stock market development, although political risk did not play a significant role. Foreign financial inflows, however, had a positive effect in the short run. Additionally, investors’ mental accounting and overconfidence also influenced the stock market’s price movements.
These results are consistent with findings from other studies that examined the relationship between stock prices and exchange rates. For instance, the US Dollar has an indirect positive effect on stock prices, as does the Euro. In Kenya, interest rates and the stock market are strongly linked, so that a deficit in one of these three variables may have a direct impact on stock market returns.
Hours of trading on NSE
The Nairobi Securities Exchange in Kenya will open for trading later than usual today due to a technical glitch that affected trading. The central depository system, which processes trades, was shut down while the exchange tried to fix the problem. The company said services were restored just before 4pm. The company said trading would resume as usual on Wednesday.
The Nairobi Securities Exchange is a key entry point for investors in East Africa. It has been working for a long time to develop a derivatives market. The exchange has gone through several trials and has finally managed to overcome some hurdles. The market will initially offer investors single stock and equity index futures. Later, the exchange will offer financial and commodity derivatives.
The Nairobi Securities Exchange has a large role in the economy of Kenya. The market helps to promote savings and investment. It is imperative that the market continues to grow.
Alternative indexes available
The Nairobi Securities Exchange is a major entry point for foreign investors in East Africa. It is also the second exchange in Sub-Saharan Africa to offer derivatives trading. Under the new initiative known as the Next Derivatives Market, the exchange will offer index futures based on the NSE-25 share index and single stock futures on Safaricom, KCB Group, Equity Group, and EABL. The Kenya Stock Exchange also provides access to a number of brokers that help customers trade on the Kenyan market.
The Nairobi Securities Exchange is a full-service securities exchange supporting trading of equities, debt, and derivatives. The exchange is also a clearing house for treasury bonds and other instruments. In November 2006, the exchange signed an MoU with the Uganda Securities Exchange to introduce mass cross listing, which enables listed companies to dual-list on both exchanges.
In 1992, the Nairobi Stock Exchange became a fully independent institution, incorporating stockbrokers who were initially members of the European-dominated community. It was only after independence that Africans were allowed to trade on the exchange. In 1951, Francis Drummond established the first professional stock broking company in Kenya. He approached the finance minister Sir Ernest Vasey and the London Stock Exchange officials. London agreed to accept the Nairobi Stock Exchange as an overseas stock exchange.
Cost of trading on NSE
The Nairobi Securities Exchange (NSE) is Kenya’s primary stock market and provides automated trading for publicly listed companies. It offers trading in Equities, quasi equity products, and derivative products. The exchange is currently home to 64 publicly traded companies, covering 11 sectors of the Kenyan economy. NSE fees are based on volume and price per share.
The NSE’s levy on equity transactions has been reduced to 0.114 percent of the transaction value, after a five percent rebate. Other levies, which include those charged by the Central Depository and Settlement Corporation (CDSC) and the Capital Markets Authority (CMA), will remain unchanged.
One of the main reasons for the slow uptake of the Nairobi Stock Exchange (NSE) is the cost structure of day trading. The cost structure makes it difficult for investors to profit from such trades. The price of a stock needs to move a few percentage points in a single day to make a profit. However, the NSE’s management is aware of the problem, and it is expected to solve it soon. The new same-day trade mechanism is expected to increase liquidity at the Nairobi bourse and generate more revenue from commissions.