ACTIVATE

High NSE investor activity drives reactivation of accounts

CMA expects more investor activity with the introduction of day trading

In Summary
  • According to the Capital Markets Soundness Report Q3 2021, 12,673 CDS accounts were activated in the quarter compared to 6,214 in Q2 2021.
  • CMA attributed the increased active accounts to higher retail investor participation at the Nairobi Securities Exchange(NSE).
An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE
An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE

Improved participation at the NSE in the third quarter saw more investors reactivate their accounts as the market picked up on eased Covid-19 containment restrictions.

The Capital Markets Soundness Report Q3 2021,  shows 12,673 Central Depository System accounts were activated in the quarter, a 103.94 per cent increase compared to 6,214 in Q2 2021.

CMA attributed the increased active accounts to higher retail investor participation at the Nairobi Securities Exchange(NSE).

The regulator expects more investor activity with the introduction of day trading translating into higher product update and market liquidity.

The NSE is set to commence day trading on November 22 to deepen capital markets.

Day trading is the purchase and sale of a security within a single day or trading session or multiple times over the course of the day.

Successful day trades are seen as lucrative since they could turn a quick profit for investors.

Despite the improved investor activity, foreign investor turnover declined to 51.53 per cent in Q3 2021 from 58.73 per cent in Q2 2021.

However, in the net foreign portfolio segment, there was an inflow of Sh934million in Q3 2021 compared to an outflow of Sh2.009billion in Q2 2021.

This means that more foreigners sold their shares at the Nairobi bourse.

CMA attributed the improved foreign investment to payments of interim dividends and increased profits in the first half-year period.

Average market capitalisation in the quarter stood at Sh2.7 trillion, representing a 19.25 percent increase from Sh2.3trillion.

In the report, CMA noted that the market capitalisation to GDP fell to 25.84 per cent from 27.09 per cent after the rebasing of the country's accounts.

The National Treasury in September rebased the country's economy by changing the base year to 2016 from 2009 thereby pushing the nominal GDP upwards by 4.84 per cent to Sh10. 75 trillion from Sh10. 25 trillion in 2019.

The regulator warned that this may affect performance targets and Kenya’s global rankings if there is no growth in new listings.

In the period under review, market volatility remained low at 0.31 per cent compared to 0.34 per cent in Q2 2021.

CMA attributed this to investors demanding for stable returns offered in the fixed income market segment and sustained investor interest in select large cap stocks.

As for market liquidity, it remained at a low of 1.11 per cent in Q3 2021 compared to 1.44 per cent in Q2.

CMA is banking on day trading and margin trading to enhance market liquidity.

Similar to global equity markets performance, in the international arena, Kenya MSCI index ended on a low, having dropped 2.59 per cent in the month of September.

The regulator is banking on enhanced vaccination programs to improve investor sentiments.

In the period under review, CMA and KEPSA signed an MoU to support market deepening and uptake of capital market products while Safaricom’s partnered with the NSE to enable customers to invest using ‘Bonga Points’.

According to CMA, the two partnerships towards capital markets development will unlock capital raising and cross-listings opportunities as they also open investment opportunities for retail investors.