Nairobi Securities Exchange
The Nairobi Securities Exchange (NSE) is the primary stock exchange in Kenya, providing a fully electronic platform for trading in equities, bonds, ETFs, and other financial instruments. This tutorial will cover what the Nairobi Stock Exchange is and the history behind it, as well as providing information about its biggest stocks. It will also lay out how UK traders can choose and start trading with the best Nairobi Stock Exchange brokers.
The NSE requires traders to register for a Central Depository System Account. This involves proof of residence in Kenya among quite a stringent list of criteria. As a result, it is not easy for foreigners to trade Nairobi Securities Exchange stocks.
However, if you want exposure to the region, you could consider a fund or ETF that covers this market. The iShares MSCI Frontier and Select EM ETF is one option (available at IG Group).
What Is The Nairobi Stock Exchange?
The Nairobi Securities Exchange (NSE) is the main securities exchange in Kenya, located in the capital city of Nairobi. Established in 1954, it provides a platform to trade various instruments based mainly on Kenyan companies’ stock.
The Nairobi Securities Exchange has a total market capitalisation of approximately £16 billion with over 60 listed companies from various sectors, including finance, manufacturing, telecommunications, and agriculture.
The All-Share Index (NASI) is one of the main benchmark indices of the Nairobi Securities Exchange, representing the performance of all the listed companies.
Headquartered in Nairobi and with office buildings on Westlands Road, the NSE functions as a self-regulated organisation, with the Capital Markets Authority (CMA) overseeing and providing general regulation of the securities market.
The Nairobi Securities Exchange provides regular updates on the market performance, security, and forex rates to investors and traders.
The Nairobi Stock Exchange’s history dates back to 1922 when the first share dealing company was established in Kenya, though the exchange was only formally established in 1954.
Initially, the Nairobi Securities Exchange comprised only a few listed companies and trading was done through an open-outcry system. The exchange experienced significant growth in the 1970s and 1980s, and by 1990, it had become the second-largest exchange in Africa after the Johannesburg Stock Exchange (JSE).
In 2006, the Nairobi Stock Exchange introduced electronic trading, making the market more efficient, bringing notable increases to trading volumes, and leading to a surge in overall market capitalisation as more companies applied for listings.
In 2009, the Nairobi Securities Exchange introduced exchange-traded funds (ETFs), which provided investors with a straightforward and cost-effective way to invest in the Kenyan stock market, and in 2018 it introduced derivatives trading with futures and options.
Its recent performance has been solid, with the NSE share index rising by 10.7% in 2020 despite the Covid pandemic and challenges posed by dollar fluctuations.
The Nairobi Stock Exchange is owned by its members, who elect a board of directors to oversee its management. The CEO, Geoffrey Odundo, is responsible for day-to-day operations and implementing the strategic direction set by the board.
- Safaricom – The largest company by market capitalisation on the Nairobi Securities Exchange, this telecom giant offers mobile and fixed-line telephone services, mobile money transfer, and internet services. Market capitalisation (March 2023): KES 718 billion (GBP 4.37 billion).
- Equity Group Holdings – A financial services company that offers banking, insurance, and investment services. Market capitalisation (March 2023): KES 168 billion (GBP 1.02 million).
- KCB Group – Another financial services company that offers banking and investment services. Market capitalisation (March 2023): KES 109 billion (GBP 662 million).
- East African Breweries – A beverage company that produces and distributes beer, spirits, and non-alcoholic beverages. Market capitalisation (March 2023): KES 133.25 billion (GBP 809.98 million).
Companies must meet the following listing requirements:
- At least 50 shareholders for a public company and a minimum of 7 shareholders for a private company
- A minimum issued and paid-up capital of KES 50 million for a primary listing or KES 10 million for a secondary listing
- At least three years of audited financial statements and management accounts
- A track record of profitability for at least two of the last three years
- A board of directors with at least three members, including an independent director
- A clear strategy and a prospectus outlining the terms and conditions of the offering
How To Choose A Nairobi Securities Exchange Broker
- Rates and fees: Compare the commission rates and fees charged by different Nairobi Stock Exchange brokers. This includes trading and non-trading fees, such as currency conversion charges if depositing GBP.
- Platform and charts: Look for a broker that offers a powerful trading platform with live data and charts so that you can monitor Nairobi Stock Exchange movements in real-time. A mobile app is also key for anyone who needs to trade while on the move.
- News and analysis: Look for a broker that provides regular news and analysis on Nairobi stocks and regional developments to help inform trading decisions.
- Customer support: Ensure details for contacting customer services are clearly outlined, with various ways to contact the company such as a phone number, email address and live chat. You should also look for Nairobi Securities Exchange brokers that provide customer support during trading hours, if not 24/5 or even 24/7.
- Demo Account: The best Nairobi Securities Exchange brokers offer demo accounts so you can practise your strategy and get used to the platform without risking real money.
How To Trade With Nairobi Stock Exchange Brokers
Do Your Research
Before you start trading on the Nairobi Securities Exchange, carefully research the stocks listed. You can find listed companies on the Nairobi Stock Exchange website, as well as the All Share Index, and historical data.
Choose A Broker
You will need to choose a brokerage firm that has access to the Nairobi Securities Exchange and offers trading services for UK customers. Register with your chosen broker by providing your full name, address, and any documents needed for KYC verification.
Note, due to the limited accessibility for foreign investors, an ETF or fund with exposure to the region could be a suitable alternative. The iShares MSCI Frontier and Select EM ETF, for example, is available at IG Group. However, with a 7% weighting of Kenyan stocks, you will also be exposed to other locations in Africa.
Fund Your Account
Before you can start trading you will need to deposit funds to your Nairobi Securities Exchange brokerage account. Be aware of transaction fees and ensure the firm accepts your preferred method of payment.
Interactive Brokers, for example, accepts debit cards and e-wallet payments via PayPal and Neteller.
Open A Position
Once your account is funded, you can start trading assets linked to the Nairobi Securities Exchange. This is likely to mean trading funds or ETFs, which you can buy directly or can sometimes use as the basis for a derivative such as CFDs.
Monitor price movements and track the performance of your assets through the Nairobi Securities Exchange website, for example, which has live data feeds and a searchable table of current share prices.
Also stay abreast of the Nairobi Stock Exchange’s rules and regulations, plus any corporate actions or dividend announcements that may affect your investments.
The Nairobi Securities Exchange’s trading hours are from 6:30am GMT to 3:00pm GMT on weekdays.
Trading is closed on weekends and during Kenyan public holidays.
Bottom Line On The Nairobi Securities Exchange
The Nairobi Stock Exchange provides traders with an opportunity to invest in the growing economy of Kenya, though with restricted direct access to buy shares in the UK, trading vehicles may be limited to funds and ETFs. Follow Kenyan news developments and regional politics to keep abreast of factors that affect trading positions.
What Is The Role Of The Nairobi Securities Exchange?
The Nairobi Securities Exchange (NSE) plays an important role in the Kenyan economy by providing a platform for businesses to raise capital as they issue securities. It also provides a means for people to invest in Kenyan businesses, contributing to the development of the country’s financial markets.
What Is The Nairobi Securities Exchange All Share Index?
The All-Share Index (ASI) is the benchmark index of the Nairobi Securities Exchange. It is a market capitalisation-weighted index that tracks the performance of all the listed companies on the NSE.
The ASI is calculated and published in real-time throughout the trading day, and it is widely used by investors to monitor the overall performance of the Nairobi Securities Exchange.
What Kind Of Stocks Are Listed On The Nairobi Securities Exchange?
The Nairobi Securities Exchange has a variety of stocks listed, including telecom giant Safaricom, Equity Bank, and KCB Bank, all among the country’s largest businesses. There are also smaller companies listed on the Nairobi Stock Exchange, as well as government bonds and other securities.
How Can I Access The Latest Information On The Nairobi Securities Exchange?
The Nairobi Securities Exchange website provides daily price lists, as well as information on listed companies, market data, and news. Some brokerage firms also provide access to real-time market data and research reports.
What Are The Risks Of Investing In The Nairobi Securities Exchange?
Investing in the Nairobi Securities Exchange, like any stock market, carries risks due to market volatility from external shocks, currency fluctuations, the risk of structural company changes, and more. Ensure you have a risk management strategy in place before investing.