Regulator plans to raise NSE’s capital

Capital Markets Authority chairman Kung’u Gatabaki (left), Treasury financial secretary Mutua Kilaka and acting CEO Paul Muthaura (right) during the launch of CMA’s strategic plan at the Hilton Hotel in Nairobi on September 26, 2013. SALATON NJAU 

By GEOFFREY IRUNGU

In Summary

• CMA seeks to increase bourse’s capitalisation to Sh1.8trn by the end of 2014.
• Currently, the NSE market cap stands at Sh1.7 trillion, making the Sh1.8 trillion mark quite close.

The capital markets regulator plans to grow the stock market size compared to the annual national output (GDP) from the current 41 per cent to 50 per cent by 2017.

This means increasing the market capitalisation of the Nairobi Securities Exchange (NSE) to Sh1.8 trillion by the end of 2014 and Sh3.2 trillion by end of 2017.

Currently, the NSE market cap stands at Sh1.7 trillion, making the Sh1.8 trillion mark quite close.

The growth is expected to be achieved not only by encouraging listing of more companies but also through increasing prices of existing shares. The regulator also aims to grow the bond market to 28 per cent of gross domestic product (GDP) from the current 23 per cent.

This means that the value of the outstanding bonds should rise to Sh1.8 trillion by 2017 from Sh859 billion this year.

Most of the listed bonds are government bonds whose stock is determined by the annual fiscal deficit.

The Capital Markets Authority Strategic Plan 2013-17 launched Thursday shows that the number of foreign investors is targeted at 32 per cent from the current 29 per cent in the next five years.

The share of market cap among top companies as a per cent of the total capitalisation is expected to come down from the current 52 to 48 per cent in the period. This should happen as more companies are listed.

CMA acting chief executive Paul Muthaura said that volatility — annual index movement — has been a concern among investors having risen to 28 per cent in 2012. This is expected to be maintained at 10 per cent annually.

Mr Muthaura said the plan is aligned to the government’s second Medium Term Plan (MTP), which is a five-year strategy within Vision 2030. The first MTP ended in June.

“We want to facilitate Nairobi to be an international financial centre (IFC) as a gateway to the capital markets in Africa,” said Mr Muthaura.

This is in a bid to reduce reliance on the commercial banking sector and donors as financiers of business and government. Growth in the IFC would also be expected to cushion Nairobi from the adverse impact of fluctuations in capital flows.

Mr Muthaura said that Kenya’s stock market can withstand any negative spillover from the recent terrorist attack at a mall in Nairobi.

“The markets have been extremely resilient in the face of recent events around Westgate (the mall) and international attention on the matter,” said Mr Muthaura.CMA chairman Kung’u Gatabaki denied accusations that the authority was over-regulating the stock market, saying that it was keen to weed out wayward characters that had tarnished its name.

“We are out to eliminate the brotherhood of capital market buccaneers and ensure that it does not regroup and do the bad things it did in the years gone-by,” said Mr Gatabaki.