Kenya’s financial markets attractiveness drops to 7th spot in Africa- Report


Kenya’s financial markets attractiveness drops to 7th spot in Africa- Report
A display of listed equities at the NSE Photo taken on August 1,2019. PHOTO | CITIZEN DIGITAL

In Summary

  • According to the Absa Africa Financial Markets Index 2020, the country has failed to make significant gains in the legality and enforceability of standard financial markets master agreements to fall behind its peers.
  • Other factors dragging down the attractiveness of Kenya’s financial markets to investors include the NSE reduced capitalization triggered by the COVID-19 pandemic which saw massive foreign investor sell-offs through the second quarter.
  • Kenya however earned recognitions for various improvements to its financial markets including the legislation of sovereign green bonds and the revamping of the NSE’s mobile trading platform which continues to support trading activities during the pandemic.

The attractiveness of Kenya’s financial markets on the continent has slumped to position seven from three according to a just released report.

According to the Absa Africa Financial Markets Index 2020, the country has failed to make significant gains in the legality and enforceability of standard financial markets master agreements to fall behind its peers.

Kenya shed a notable 39 points in the legality pillar as rivals’ implemented contractual frameworks to mitigate risks faced by investors.

As such, Nigeria, Botswana, Namibia and Ghana raced ahead of Kenya in the rankings as South Africa and Mauritius maintained a stranglehold as the two top attractive financial markets.

The adoption of the Global Master Repurchase Agreement and legal provisions to allow close-out nettings- the compensation of investors after the termination/default of contracts such as derivatives saw countries such as Ghana top the investor safeguard metric.

Kenya is at the infancy stage of establishing the investor protection protocols having only launched its derivatives market in 2019.

Other factors dragging down the attractiveness of Kenya’s financial markets to investors include the Nairobi Securities Exchange (NSE) reduced capitalization triggered by the COVID-19 pandemic which saw massive foreign investor sell-offs through the second quarter of the year.

Kenya’s continued dependence of foreign investor participation dragged down the performance of its equities segment as the investors shunned the market for safe-haven portfolios.

Further, Kenya shed points in its foreign exchange access ranking as the country struggles to assure loose capital controls in an affair that continues to raise queries on the rigidity/flexibility of the country’s exchange regime.

Unlike, South Africa and Uganda, Kenya’s Central Bank plays a larger role in the allocation of foreign currencies to enterprises and banks.

In spite of a slump in ranking, Kenya earned recognitions for various improvements to its financial markets including the legislation of sovereign green bonds and the revamping of the NSE’s mobile trading platform which continues to support trading activities during the pandemic.

Moreover, Kenya was recognized for legislating share buy back protocols through the Capital Markets Authority (CMA) and the operation of the mobile traded government bond- M-Akiba.

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Story By Kepha Muiruri
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