The Nairobi Stock Exchange (NSE) in Kenya is small and somewhat speculative. The Exchange was established in 1954.
The Exchange is sub-Saharan Africa’s fourth-largest bourse. Twenty brokers (1995) are licensed to operate, and there are over 50 companies listed, with a total capitalisation of approximately $ 1.9 billion. The NSE’s market capitalisation jumped from $US 1.7 billion at the end of 1996 to $US 2.24 billion at end May 1997. Total NSE turnover in 1996 was $US 75 million through trade of 114 million shares.
The NSE, like many other emerging markets, suffers from the lack of liquidity in the market (averaging 4% in 1996). Foreign investment on the Nairobi Stock Exchange and foreign ownership of companies is by application. Foreign investment in the local subsidiaries of foreign-controlled companies is banned so as to encourage input into Kenyan companies.
The Kenyan government has made several reforms aimed at attracting foreign investment via the Nairobi Stock Exchange. The Exchange was opened to foreign investors for the first time in January 1995, but with a maximum limit of 20% shareholding for institutions and 2,5% for individuals. The ceiling on foreign investment has recently been increased to 40% for institutions and 5% for individuals, but fewer than 20 of the 58 listed companies are available to foreigners.
Since 1995 the Kenyan government has opened trade in the NSE and gilts to foreign portfolio investors; removed exchange controls; and introduced a favourable tax regime with non residents paying a 10% withholding tax on dividends (locals 5%) but no capital gains, stamp duty or value added tax. and the introduction of a central depository system is expected to speed up clearing and settlement.
Trading takes place on Mondays through Fridays between 10.00 am and 12.00 noon. The 20 member brokerages commissions have dropped from a fixed 2.5% to a sliding scale between 1.1% and 2%.