Whenever government-issued infrastructure bonds come up for auction, they spur investor participation owing to their good returns and tax-free nature. Investors at the NSE, however are less active until the Kenya general election takes place in August. PHOTO | FILE The EastAfrican has learnt that NSE’s desertion has also been compounded by shrinking household incomes and high cost of living fuelled by escalating fuel prices and depreciating local currency, which pushed many potential investors into a financial quagmire.
A study by Capital Markets Authority shows that Kenya, like many emerging markets, offers a favourable return on instruments such as infrastructure bonds that offer a double-digit return compared with other products considered high risk such as equities.
On the other hand at the NSE equity turnover and total shares traded both declined by 23.4 percent during the week ending February 17.
Nairobi Securities Exchange (NSE) is facing challenges attracting and retaining investors on the bourse after the end of the stockmarket boom of 2008. Investors are opting for alternative investment opportunities in the market, including government bonds, investment funds and betting.
The EastAfrican has learnt that NSE’s desertion has also been compounded by shrinking household incomes and high cost of living fuelled by escalating fuel prices and depreciating local currency, which pushed many potential investors into a financial quagmire.
“There are other investment opportunities coming to the market,” said Job Kihumba, executive director in-charge of corporate finance at Standard Investment Bank.
“Individuals with, say Ksh5,000 ($44.24), will realise they definitely have somewhere to put that money away from the stockmarket. But there is also another aspect people ignore. At individual level there isn’t a lot of liquidity as sources of income have diminished and the cost of living is very high.”
Investors are now looking for safer investment options with guaranteed returns compared with the stockmarket that is highly volatile, he added.
“We have other opportunities available now. For instance, there are a lot of investment funds being created and these tend to be fixed return type and commercial banks are also coming into this space. The latest being the shilling fund launched by Standard Chartered Bank Kenya,” he said.
“People now have opportunity to invest in securities that are as volatile as the stockmarket because a lot of investors are risk-shy and do not want to take too much risk especially where uncertainty is high.”
A study by Capital Markets Authority shows that Kenya, like […]