•CMA says the move is geared towards tightening and putting some responsibility between regulator and industry players.
•In the three months to June 2023 foreign investors pulled out Sh1.5 billion compared to the Sh13.93 billion net outflow that was recorded in the first quarter.
Capital Markets Authority is planning to set a cap that will form the benchmark for the lowest stock prices at the Nairobi Securities Exchange.
In the plans currently still under the negotiations, the stock prices for companies will not go below a certain agreed threshold
Capital Markets Authority (CMA) chief executive Wycliff Shamia told the Star that the move has been necessitated by the fact some of the companies have very strong fundamentals but the valuation it quite low.
The move comes a couple of months since Safaricom values at Nairobi's Security Exchange dropped below the Sh1 trillion mark for the first time.
This eventually saw the value of the NSE drop with market capitalisation plunging below Sh2 trillion mark due to the telco's poor performance.
“NSE is a market where prices should be determined by supply and demand but now you have a case where some of the stock prices have become so low and we have picked a discussion on what do we need to do in regards to pricing of the stocks,” said Shamia.
CMA says the move is geared towards tightening and putting some responsibility between the regulator and industry players.
Shamia, however, maintained that this will not involve regulating the prices but will be a discussion with the market players on what’s good for the bourse.
“We don’t want to regulate it’s a discussion of what should be the best way of managing a trend that doesn’t make sense. This will have to involve the role of even investors so that we don’t have to take actions that will unnecessarily place the prices of stocks below the very fundamental principal point,” added CMA.
The move comes at a time that the Capital Markets regulator reported a drop in the foreign investors equity outflows that dropped by Sh12.4 billion in the second quarter of the year as the bourse slowly recovered from the impact of high interest rates and global shocks.
In the three months to June 2023 foreign investors pulled out Sh1.5 billion compared to the Sh13.93 billion net outflow that was recorded in the first quarter.
The drop in outflows came despite the market volatility increasing in comparison to the last quarter but remained relatively low below one percent.
“But from where we sit if you look at the conditions we are going through there is a bit of people not being really what will happen because of the circumstances we have seen, especially in cases where we have seen foreign investor flights from the market,” he added.
The regulator noted that they are engaging investors traders and the market in general and if there is any weakness chat a way forward on how it will be addressed after the discussions.