Diaz: NSE future is bright, developments in markets bring new opportunities

The market performance of the NSE can also be analyzed based on the listing.

In Summary

•The market performance of the stock exchange is anchored on its prowess to handle the grievances of the investors efficiently.

•The current state and performance of NSE show ideal financial efficiency.

NSE chief executive Geoffrey Odundo monitors daily trading at the Nairobi Bourse/
NSE: NSE chief executive Geoffrey Odundo monitors daily trading at the Nairobi Bourse/
Image: FILE

Stock Exchanges play a critical part in shaping a country’s economy. 

Exchanges are the central indicator and reflection of the financial condition and stability of a country.

To enable corporate stocks to be publicly traded, they must be registered and listed on a stock exchange.

If an economy is prosperous and growing, the stock exchange experiences essential trading activity.

Conversely, if the economy is slow, the trading volumes will decline and the stock exchange may present a crisis such as depression. Stock exchanges in different countries have become a very integral part of the economy. There are several stock exchanges where liquidity to investors is offered.

Because capital has grown immensely over the last fifteen years, workload on different agencies has tremendously grown including transfers and share registration.

The global view

The National Stock Exchange is fundamental and different economies adopt the stock exchange markets for growth and development. For instance, the New York Stock Exchange has gained tremendous growth over the years and helped in trade and development.

The New York Stock Exchange (NYSE) is the world’s largest stock exchange. It offers icons and entrepreneurs the opportunity to raise capital and change the world.

Their listed companies form a strong community that is committed to good governance and societal impact. The NYSE is where companies raise capital that they use to shape the future.

It has attained huge growth in investments over the years. As of June 2022, the NYSE encompasses approximately 2,400 companies with a market capitalization of over 28.2 trillion dollars.

Even though the NYSE trades stocks of all market capitalizations, it is best known for trading the stocks of large-cap companies.

The New York Stock Exchange closing auction is the single largest liquidity event of the day trading at 18.9 billion dollars per day, on average, and is the primary liquidity event for institutional operations.

The other crucial stock exchange is the London Stock Exchange. The London Stock Exchange is regarded as one of the world’s oldest stock exchange.

It provides London with a trading floor where members could buy and sell shares. Today, share trading is almost entirely done electronically and London Stock Exchange provides this service with state-of-the-art systems that can process over a million trades per day. 

London Stock Exchange provides a platform for governments and companies from around the world to issue securities such as shares or bonds to raise capital.

The available data shows that London Stock Exchange has progressive revenue growth and in investments, with a total investment growth of up 3% to 2,124 million euros (2019: 2,056 million euros ) and total income up 6% to 2,444 million euros (2019: £2,314 million) (up 5% on a constant currency basis).

The London Stock Exchange also is a significant revenue-generating business with historic revenue growth of 20% (CAGR) over a 3-year period. Passive assets under management are approximated to grow to 36.6 trillion dollars in the next five years.

NSE, India’s major trading stock shares and bonds have a significant impact on the stock exchange market.

It is rated one of the large market stock exchange in terms of transactions in the world. With the availability of technology, it has become the leading stock exchange in countries such as India, providing platforms for trading futures, bonds and stocks.

The market performance of the stock exchange is anchored on its prowess to handle the grievances of the investors efficiently.

The current state and performance of NSE show ideal financial efficiency.

The market performance of the NSE can also be analyzed based on the listing. Only listed companies’ shares are traded on the exchange.

Listing on NSE assists qualifying companies with vast access to investors, the largest market depth as well as liquidity the highest visibility, investor benefits and the fairest pricing.

The NSE has more than 1,000 listed companies. The companies have shown a positive growth rate over the years, making the NSE to be a significant venture globally.

Moreover, the companies have experienced an overall increase in their share since the beginning of 2022.

Stock Exchange in Africa

In Africa, Johannesburg Stock Exchange (JSE) remains one of the leading stock exchange markets.

It is the leading marketplace for equities, debt and derivatives trading on the African continent.

JSE features more than 350 corporate listings on its Main Board and AltX, the JSE ranks high in the global exchange.

As of the end of 2017, the exchange boasted an aggregate market cap of 951 billion dollars and was comprised of 472 individual corporate listings.

While featuring only about half of the capitalization of the 10th-ranked Frankfurt Stock Exchange, the JSE sits just ahead of the Madrid Stock Exchange, Taiwan Stock Exchange and Brazil's stock exchange market on the top 20 global rankings.

JSE has important trade prospects. There has been an improvement in trade in shares over the years.

Increasing trade in shares contributed to improved performance, with double-digit revenue growth across all of the company’s divisions.

JSE share price seems very strong, and higher trading volumes are forecast to persist into the near future, which bodes well for the company’s performance and investors who buy JSE shares.

Kenya's NSE is the fastest-growing in the region

NSE is one of the fastest-growing economies in Sub-Saharan Africa.

Its performance has been affected by issues such as inflation and electoral processes.

In 2022, the NSE market cap stood at Sh1.94 trillion compared to Sh2.7 trillion recorded over a similar period in 2021 while the total value of outstanding bonds stood at Sh3.59 trillion.

The trading levies of the exchange bonds also decreased by 17.8% from Sh32.9 million in the first quarter of 2021 to Sh27.1 million in the first quarter of 2022.

The Nairobi Stock Exchange attributed this challenge to other factors such as reduced secondary trading activity due to increased market yields offered in the primary market.

In the second half of 2022, the management of NSE expects trading to return to normalcy after the completion of the election process, which affected investor sentiments and trading activity.

The current share price of NSE is stable and crucial. It has enabled NSE to record a 3% gain.

It is critical to note that stock investment does not happen in a vacuum. It operates in a world that experiences challenges and opportunities that affect stocks and investment decisions.

However, it can still be profitable to operate in the stock exchange market. The challenges and opportunities in today’s social and economic landscape will help or hurt the market operations.

Challenges and opportunities

Some of the challenges are issues such as debt; for stock investors, when a company is over-indebted, the risk economic risks of the company can result in a reduction in the performance of that company.

Inflation is another challenge. There is a close relationship between debt and inflation. When the government spends beyond their budgets, they are involved in high debts.

When they hit heavy crossroads, they print more money, and in turn, they overproduce money, leading to spiral inflation. Inflation hurts the stock exchange markets.

Some of the opportunities are economies investing in infrastructure and business development. Infrastructure is significant in enhancing trade among different countries, which improves economic growth. However, market competitiveness, innovation and business growth are essential for strong economies.

The overall economic growth results in strong currencies, which thus makes the stock exchange to be stable. In addition, the economies can heavily invest in technology.

Increased technological advancement leads to innovation and overall affordable production of goods and services.

Privatisation of parastatals

Privatisation of parastatals could be vital in a bid to improve the performance of the stock exchange.

It ensures that there is minimal control from the government, therefore, more growth and market growth opportunities. These are some of the triggers that spur growth in companies and organizations.

Some of the global companies that have utilized such opportunities are the Bank of America, Exxon Mobil and NASDAQ.

Their operations have led to the growth of the private sector at large and created more employment or entrepreneurship opportunities.

Growth in the stock exchange is important for economies across the globe. There are various guidelines that can be put in place to ascertain this such as providing an accelerated route for different countries that seek to list on the NSE.

That can occur through providing a platform and advisory services to issuers to ensure a reduction in the time taken to list in the NSE market.

There should be awareness of the investment opportunities and the Kenyan economy for Kenyan investors.

Communication and transparency will help the investors to grab opportunities in the capital markets to facilitate their financial growth.

Boosting FDI in local institutions is fundamental to increasing growth in an economy and in turn, in the stock exchange.

These will make Kenya more favourable for growth. It is important to improve the benefits to the shareholders. One of the ways to achieve that is through ensuring transparency and inclusive participation in any proceedings.

Also, providing efficient services to different clients can lead to more benefits and value for the shareholders.

High growth in trading volumes as a result of increased use of technology is vital and this helps in more activity in the stock market. Thus, more benefits to the shareholders.

Stock exchanges in Kenya have now become an integral part of the economy. It has ensured the establishment of a nationwide trading facility for equities, debt and other hybrid instruments as well as access to investors across the nation through an appropriate communication network.

The future of the NSE is thus bright and more investment opportunities will arise due to engagements and business growth in the NSE markets.

Chris DiazBusiness - Leader and Brand Africa Trustee

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