Dormancy at NSE hurting turnover at the bourse

The Central Depository and Settlement Corporation (CDSC) recently revealed a concerning statistic - nearly 90% of the 1.6 million share accounts with the firm have remained dormant for the past two years. The Dormant Account (Rules) Guidelines, approved by the Capital Markets Authority (CMA) in April 2018, are being implemented to address this issue. This dormancy among local investors is having a significant impact on market turnover and participation. Caleb Mugendi, Assistant Manager of Public Markets at Cytonn Investments, shed light on the implications of this trend and the strategies being employed to rejuvenate market activity. The lack of trading activity by retail investors is not only dampening market turnover but also influencing market dynamics as a whole. Despite efforts to attract more retail investors, the market is still predominantly driven by foreign investment. Concerns have been raised about the impact of stagnant accounts on market vibrancy. Mugendi highlighted the need for education on long-term investing and the importance of viewing the stock market as a tool for wealth creation rather than speculative trading. The focus is on educating investors to weather market volatility and adopt a long-term investment approach. The interview also touched upon the initiatives spearheaded by the Nairobi Securities Exchange (NSE) to encourage listing and boost SME participation. Programs like the Ibuka and the planned waiver of capital raising and listing fees for small and medium-sized firms seeking to go public aim to stimulate market activity. Despite the decline in turnover, the market remains resilient with continued inflows from local fund management and pension funds. The call for retail investors to re-engage in the market is crucial to enhance market vibrancy and diversity. The tax amnesty and incentives for companies listing on the NSE could pave the way for more firms to access public funds and broaden ownership. The recent performance of the market has seen heightened activity in major counters like Safaricom, Equity Bank, and KCB as dividend season wraps up and earnings season approaches. Safari Com continues to dominate market volumes, underscoring its pivotal role in the market. However, there is a need for more diversity in trading volumes beyond the blue-chip companies to stimulate broader market movement. The future outlook hinges on efforts to educate and attract retail investors, enhance SME participation, and create a more inclusive and dynamic market landscape.