Geoffrey Odundo, CEO, Nairobi Securities Exchange (NSE): Interview

Interview: Geoffrey Odundo

Which areas have the most potential for new listings on Kenya’s capital markets?

GEOFFREY ODUNDO: The capital markets industry in Kenya has come a long way and is gaining substantial traction among corporates seeking to raise capital. In 2014 the exchange saw KSh6.1bn ($67.1m) in additional equity issues and KSh19.84bn ($218.2m) in corporate debt from various listed companies, as well as three new listings on its Growth Enterprise Market Segment (GEMS). These events show that our companies are gradually opting to raise capital for their various initiatives through the capital markets.

We are currently having one-on-one meetings with listed companies to ensure that they understand the capital-raising opportunities available on the exchange. In 2015 we expect an increase in listings as we gear up to launch derivatives, real estate investment trusts and exchange-traded funds.

What can be done to bolster growth in GEMS?

ODUNDO: It is anticipated that any new market such as GEMS takes time to pick up. However, we are encouraged by several listings since the segment was launched in 2013, including the three new ones in 2014. In the aggregate, the newly listed GEMS companies added KSh6.7bn ($73.7m) to the NSE’s market capitalisation as of end-2014. To support the growth of the segment, we are conducting various marketing campaigns to increase listings. We are engaging with strategic partners to educate potential firms on the benefits of listing, as well as organising forums and meetings with advisers and potential firms to demystify the market and guide them through the process. We should see some new listings in 2015.

How much demand is there for a futures market?

ODUNDO: There is great demand and appetite for the derivatives market in Kenya, from both investors and market participants. We have so far approved three clearing members and seven trading members to participate in the market, with others in the pipeline. We are currently gearing up to launch the derivatives market, which should occur in 2015. Derivatives will not only offer a wider range of investment channels, but also give individuals, corporates and farmers a view of the future prices of currencies, interest rates, minerals and agricultural products. We have conducted intensive training for market intermediaries and clearing banks, which are eager to participate in this new segment. We will also be embarking on a public education and awareness campaign for investors and the public at large. We believe this market will revolutionise Kenya’s capital markets industry.

What is being done to boost local market liquidity?

ODUNDO: We are working on day trading for equities and have been conducting various initiatives to boost market liquidity. We are also working on a platform for borrowing and lending securities, which will allow stock, derivatives and other securities to be loaned to an investor or firm. The Capital Markets Authority is developing rules to guide this process, which should support growth in short selling and derivatives.

How can one encourage cross-listing on the NSE?

ODUNDO: Cross-listing is a major step towards our goal of ensuring that companies with substantial operations in Africa are accessible to both Kenyan and international investors, while also increasing their liquidity. We currently work with various international exchanges and participate in local and international roadshows to encourage cross-listing, and have even signed memoranda of understanding with several exchanges, including those in Seoul and Johannesburg. We recently hosted a forum in Nairobi with a number of partners, where stakeholders were educated on the benefits of cross-listings and the process for doing so. Additional awareness forums are also in the pipeline.