Kenyan Wildlife Rangers in

Derivatives market in Kenya

The Nairobi Securities Exchange plans to start trading derivatives and real estate investment funds this year as sub-Saharan Africa’s third-biggest bourse targets a fourfold rise in its market capitalization by 2023.

“The diversity of products and services that we offer will make us more relevant to the economy” as the exchange seeks to attract a broader range of investors, Ouma said.

The Kenyan bourse, which currently trades stocks and bonds, is increasing the variety of securities on offer as the industry regulator seeks to boost growth of the country’s capital markets. The authority is targeting a market capitalization of 7.2 trillion shillings ($83.4 billion) by 2023 from 1.85 trillion shillings now, while bonds sold by companies on the exchange may surge to 40 percent of gross domestic product from 2 percent over the period, it said last month.

Kenya’s exchange ranks as sub-Saharan Africa’s biggest, after South Africa and Nigeria.

The exchange’s Growth and Enterprise Market Segment, which was created last year to make it easier for small businesses to become publicly traded, is targeting five listings this year, Ouma said. Home Afrika Ltd., a Nairobi-based house builder, is the only company listed on the section.

Derivatives Law

President Uhuru Kenyatta on Dec. 22 assented to a law allowing the creation of a futures market, Ouma said. The regulator said in July it will initially focus on interest-rate and foreign-exchange derivatives, and will include commodity futures.

The Capital Markets Authority has published rules on the establishment of real estate investment trusts, publicly traded entities that are exempt from corporate taxes and build or invest in property. A development REIT finances the construction of projects for a later sale, while an investment REIT is designed to generate regular income such as rent.

A plan first introduced by the Nairobi Securities Exchange five years ago to demutualize is also expected to come to fruition this year, Ouma said.

“The main issue that had caused a delay was market access fees for new participants, ” he said. “That has now been resolved.”

Demutualization is the separation of ownership from the management of a stock exchange, with a view to having it publicly owned and traded.

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