East Africans flock to the Nairobi bourse

Rwandan, Tanzanian and Ugandan investors have grown the number of trading accounts they open annually at the Nairobi Securities Exchange in the past two years more consistently than any other category of investors, new data shows.

Third quarter data released by Kenya’s Capital Market Authority last week shows East African individual investors opened 97 Central Depository Securities accounts at the NSE in the nine months to September 2011.

This was an improvement on the 92 accounts opened in the 12 months of 2010 and the 79 opened in 2009.

Other categories of investors such as Kenyan individuals, Kenyan companies, foreign investors, both individual and institutional, and East African companies have not opened as many CDS accounts in the nine months to September 2011 compared with 2010 and 2009.

So, what do the East African investors see in the NSE that others don’t?

Although the CDS accounts opened by East African individual investors remain far smaller compared with the number Kenyan individuals open at the bourse, something is obviously slowly attracting the rest of the region to the NSE.
Kenyan individual investors, who opened 120,756 accounts in 2010, have only managed 27,669 accounts in the nine months to September 2011. In 2009, Kenyan individual investors opened 52, 836 accounts.

All indications are that Kenyan individuals will not open an additional 100,000 accounts in the last quarter of 2011 to surpass the previous year’s figures because trading activity at the NSE has remained subdued. Investors have kept off shares citing the high interest rates, which make them prefer government securities to equities.

One school of thought is that the Ugandans are opening trading accounts at the NSE in anticipation of the Umeme IPO scheduled for next year.

When investors smell an opportunity, say a string of hot initial public offerings where they can buy and sell a stock and make a quick profit, they go ahead to open multiple accounts, to maximise their share of allocation during the IPO.

Umeme, the electricity distributor is expected to cross-list at the NSE and the Ugandan Securities Exchange.

Cross-listed shares such as Centum, Kenya Airways, Jubilee Insurance, trade more on the NSE compared with the Dar es Salaam Stock Exchange and USE.

Since the cross-listed shares trade more in Nairobi, East Africans are better off having a trading account at the NSE.

Rwandans, Tanzanians and Ugandans are probably realising this fact and also taking positions ahead of the listing of some of their firms on the NSE by opening more CDS accounts in Nairobi.

So, investors will go the extra mile to open and operate, as proxies, CDS accounts in the names of their relatives or friends who know nothing on trading in shares.

Expect an influx of Rwandese, Tanzanians and Ugandans at the NSE in 2012.