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East African firms can now issue bonds abroad

Thursday July 27 2017
Bond

The move would allow foreign investors to familiarise themselves with Kenyan companies and create opportunities for foreign companies to raise capital in the country. FOTOSEARCH

By JAMES ANYANZWA

East African companies have the chance to raise new capital in Kenya without going through the Nairobi Securities Exchange.

This follows a move by the capital markets regulator to approve rules for the listing and trading of global depositary receipts and notes — financial instruments that allow local investors to trade in shares and bonds of foreign companies that are not listed on the local bourse.

Capital Markets Authority chief executive Paul Muthaura said the move would allow foreign investors to familiarise themselves with Kenyan companies and create opportunities for foreign companies to raise capital in the country.

Mr Muthaura said small and individual investors would have the opportunity to buy shares and bonds in foreign companies that are not listed on the Nairobi bourse.

“Individuals can invest in global deposit receipts and notes of foreign companies if they are made available for trade in Kenya by the foreign issuer,” Mr Muthaura said.

Diversified basket

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According to the CMA, the new product is meant to deepen and develop the capital markets by offering investors a diversified basket of investment products, and promote Kenya as an attractive investment destination.

Under the arrangement, foreign companies could issue bonds in the Kenyan market while local companies could issue bonds in foreign markets to tap liquidity and appetite in those markets.

The conventional trading products on the Nairobi Securities Exchange —bonds and shares— which are highly price-sensitive, have prompted the need for diversification to reduce investors’ exposure to risk.

In 2015, the NSE launched the Real Estate Investment Trusts market to provide avenues through which small and individual investors could own pieces of the property market.

In February this year, the regulators also approved the listing of Exchange Traded Funds on the NSE’s Main Investment Market Segment. Plans are also underway to introduce a futures and derivatives market on the NSE.

READ: Finally, investors can put their money in gold on NSE

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