Kenya set to introduce ETFs to strengthen market diversity

by Elayne Wangalwa 0

Kenya is set to introduce Exchange Traded Funds (ETFs] in an effort to broaden products available in the Kenyan market.

Following approval by the Capital Markets Authority (CMA) board, key stakeholders on Thursday highlighted a roadmap for ETFs. The funds are expected to trade on the Nairobi Securities Exchange (NSE) by the middle of this year.

“If you look at the context of Capital Markets 10 year master plan some of the key derivable we had committed as an industry is to bring forward in placing Kenya through the heart of financial markets in the continent,” Acting CEO at CMA Paul Muthaura said during a media briefing

“One of the key issues was product diversification and how fast it will bring new products to help investors both locally and internationally.”

With the introduction of ETFs, investors will have an opportunity to get access and track indexes of various commodities like gold, platinum and oil, as well as bonds and assets. The ETF is also expected to tap into the country’s relatively low market liquidity. This move will encourage foreign investment and boost liquidity.

“They [ETFs] are so much affordable means, particularly retail investors to get access to the capital markets and also diversify their portfolio. So instead of just buying one stock you get exposure to a number of different listed securities or even an asset like gold or platinum,” Donald Ouma, product development manager at NSE explained.

In Africa, South Africa is the frontrunner in the ETF market with about 34 ETFs. Other countries with ETFs are Botswana, Ghana, Nigeria, Egypt and Namibia.

As a result, the CMA is working closely with the Nairobi bourse, the Central Depository and Settlement Corporation, Absa Bank Limited which is a wholly-owned subsidiary of the Barclays Africa group and other key stakeholders.

The CMA also held a forum in Nairobi and it emerged that a guidance note on ETFs has already been submitted to the authority for review and approval.

“The consultative forum presents an opportunity for stakeholder such as potential promoters of ETFs to understand and appreciate the process and the prerequisites for initial trading of ETFs in Kenya,” Muthaura said.