A section of Nairobi Securities Exchange (NSE) (photo/standardmedia.co.ke)
Nairobi Securities Exchange has been advised to attract more local investors in order to reduce the big gap between the local and the foreign investors.
This was proposed by the Barclays Africa Group Financial Markets, that researched the available markets in Africa.
After the research, the Barclays Africa Group's reported that the range between the local and the foreign investors was very big. Through the head of the group, George Asanti, the group said the very big gap would expose the Exchange Market to the instability and volatility in the dependency of the foreign investors.
“Having local investors is critical because they are a buffer to volatility. With a strong local investor base, any time a foreign investor wants to move out of the marker it is not really a problem because you will have a local investor to take up the stake.” Asanti said.
With an index of 31, Kenya was ranked number five, as South Africa, Namibia, Botswana and Mauritius performed well in the report. In Africa, NSE took number five from the top. However, it needs to focus on diversity to expand its market; according to Mr. Asanti.
Basically, the availability and the participation of local investors is key to market expansion. The top African countries were named and favoured because of their capability to have many local investors.
“We don’t believe there are enough instruments and innovations to capture the market. That also translates to the gap we see on the market,” Asanti said in the report.
NSE should now be focused to have as many local investors as the foreign investors to reduce the gap and avoid the risk of volatility in case the foreignors leave.