Stimulate Growth Through EAC Capital Markets Collaboration – NSE Chair

Nairobi Bourse Chair Calls for EAC Capital Markets Collaboration to Stimulate Growth

Kiprono Kittony, NSE Board Chair PHOTO: NSE

The Nairobi Securities Exchange (NSE) Board chair has called for collaboration with capital markets in East Africa to stimulate and spur market development.

“We need capital market collaboration in EAC to develop scale,” Kiprono Kittony said via his Twitter handle adding that  Kenya and Tanzania bourses are worth a combined $63B USD,  which is 6 per cent of the Johannesburg Stock Exchange.

The 18th Edition of the Capital Markets Soundness Report (CMSR) for the Quarter ended March 2021, found out that the domestic capital markets remained sound attributed to low volatility in equity prices as the economy adjusted to the Pandemic.

However, its liquidity and concentration risk persisted “as reflected in the low turnover ratio and high market concentration by few large-cap companies.”

The East African Community (EAC) has four operational stock exchanges; the NSE, RSE, DSE, USE in Kenya, Rwanda, Tanzania and Uganda respectively. 

A total of 110 companies are listed on the four exchanges; 62 on the NSE, 9 on the RSE, 21 on the DSE and 18 on the USE. 

“By the end of 2011, the four EAC stock exchanges commanded a combined equity market capitalisation of US$ 22 Billion for which NSE accounted for 55% with a market capitalisation of US$ 12 Billion,” according to data from the EAC portal.

Besides a difference in the regulatory frameworks, EAC securities regulators and market participants have each formed regional associations to progress issues of capital markets integration. 

Some of them include the East African Securities Regulatory Authorities (EASRA) for securities regulators and the East African Stock Exchanges Association (EASEA) for market participants.

According to the Absa Africa Financial Markets Index 2020,  Kenya was ranked 7th a decline compared to its third position in 2019 and 2018.

In the fourth report, Uganda retained position 10 while Tanzania slipped from seventh to rank 12 as Rwanda also dropped from the ninth position to 13.

The index grades countries on six principles of financial markets specifically; market depth, access to foreign exchange, market transparency, the capacity of local investors, macroeconomic opportunity, and the legality and enforceability of standard financial markets master agreements.

Kenya also lost three points on the market depth pillar to score 53, partly because of the impact of Covid-19 on Nairobi Securities Exchange market capitalisation and activity.