Stockbrokers bid at the Nairobi stock exchange during the last open outcry trading system in the capital Nairobi, September 8, 2006. PHOTO | POOL The rally being witnessed in pockets of the Nairobi Securities Exchange (NSE) is a sign that local and foreign investors are willing to bet on Kenya.
The entire market capitalisation has reached record highs of Sh2.92 trillion, buoyed by gains on large firms, including Safaricom and the top banks.
There is a lot the government can do to aid in the development of deep and functioning capital markets, which have many benefits such as attracting foreign exchange and warehousing the wealth of retirees and other classes of investors.
It is not a secret that the NSE is heavily skewed towards Safaricom, the big banks, cigarette manufacturer BAT Kenya and EABL.
This is a natural evolution of the problems affecting the rest of the market that have not been addressed. Many of the listed firms are either loss-making, poorly managed, mired in scandals or simply too small to attract major institutional investors.
The solution is to foster a conducive business environment, enforce existing regulations and encourage profitable private firms to go public.
The government, in particular, needs to list and sell stakes in parastatals while improving the corporate governance.