Why invest in Nairobi Stock Exchange?
Past
few years have seen a rapid growth in African economy and Kenya has
remained one of the pioneers in bringing this widespread economic change
in the region. An industrialized national vision by the government and
rapidly commercializing economy is driving foreign investment and
international companies to land on these financially fertile lands.
The
times when most African countries were home to civil war, famine and
corrupt governments are gradually fading away. Compared to past times,
peaceful elections and transition of power is clear evidence that Kenyan
government and people crave peace, prosperity and rapid economic
growth.
In
addition to this, Kenyan government envisions the country as highly
industrialized by the year 2020, making a smooth way for voracious
international conglomerates to invest in commercial banking,
manufacturing, finishing goods and improving exports.
Labor
is cheap, raw materials and natural resources are abundant, giving
unmatched profit generation capacity to industries and investment
corporations. According to several surveys, companies are reported to
show consistent double-digit profit ratio in the coming years.
Most
of all, with the government regulations in huge favor of investing
companies, easy tax and banking laws, low interest rates and stable
inflation rates, all benefit an investor of any scale.
The best part about Nairobi Stock Exchange is that it has improved its performance rapidly over the past few years and continues to grow. Here is the latest snapshot of the Nairobi stock exchange.
Where to Start?
The
first step is to find the right local brokerage firm, which will make
transactions on your behalf. It will help you open a Central Depository
System account in Central Depository and Settlement Corporation (CDSC)
for the investor. CDS is an online system that electronically
facilitates transactions of shares across the Nairobi stock exchange.
The list of all the market participants in
the stock market is given on the official website. Only an authorized
member of the central depository and settlement corporation can, called a
CDA or central depository agent can assist you in opening your account.
All the forms and documentation an investor needs are available online
on their websites.
However,
typically an investor needs recent photographs, certified copies of
passport or driving license and tax registration certificate. In case an
investor is a company, it would be required to submit a certificate of
registration. Usually the account is opened in one day once the
documents are complete.
As
a foreign investor, you will have to talk to your brokerage firm of the
ways they can accommodate your investments. Most of the companies offer
both, email and telephonic communication to facilitate the buying and
selling. Still, it depends on how you as an investor and your broker
come to an agreement and arrangements can be made according to that.
When
you open an account, you get a CDS account number and secret question
and answer to identify you whenever you are trading in stocks in the
NSE.
Any
investor, whether local or international is allowed to open multiple
accounts and trade in them separately. However, you can only open one
account with one agent.
You can learn more about Central Depository and Settlement Corporation here.
What after you have opened an account in the Central Depository System?
One
thing to remember here is that the trader account and dividend account
go separately. Therefore, it is better to have a local bank account
where your dividends go instead of getting them wire transferred every
time. After you have opened a trader account with the CDSC, you can wire
transfer your investment in your account and begin trading right away.
Generally,
agent companies do not have a lower or upper limit of the number of
shares an investor may buy or sell. The limitation to have a certain
minimum balance to be able to trade is also not there. However, the rate
of commission varies between two amounts. If a trader is trading below
the amount of KES100,000, the rate of commission is 2.1%, which lowers
to 1.85% if done above this amount.
How secure is your investment in the Nairobi Stock Exchange.
As
long as you are investing and trading shares of safe companies, your
investment remains safe. Taking a close look at other African stock
markets, and trends in the Nairobi Stock Exchange, the safest places to
invest are
Insurance companies
Kenya
is home to several insurance companies and with the investment coming
in from all parts of the world, insurance companies are destined to
penetrate more in the Kenyan soil, much deeper and profitable.
Increasing
middle class spectrum and gradual increase in banking and investment
loans is making insurance companies to grow at a steady pace.
Investment firms
Kenyan
government is hugely favoring investment companies to invest more and
grow and this trend is to continue over the next one and half decade.
Therefore, whether you are planning to invest short term or long term,
your investment is in much safer hands.
Banking sector
Compared
to the investment sector, the banking sector is not growing at the pace
it was expected to grow at. Still, past few years have seen a steady
growth in the commercial and personal banking. Kenyan commercial bank
and national bank of Kenya have been gainers in the past and are
expected continue to stay on the same path.
Telecommunication and IT
As the Kenyan economy grows, IT and telecom are growing at a very quick pace. There is a lot of international investment coming in the telecom sector. As of 2012 Kenya was home to 13.8 million internet users standing 35th in the world providing internet connectivity to 32.1% of the population and boasts a staggering figure of 30.7 million mobile lines standing 33rd in the world. As far as investing in shares in concerned, Nairobi Stock Exchange is a safe place to invest in this sector.
Other
areas that are gradually growing and are expected to keep growing in
the coming years are cement, mining companies and just close to them
stands agriculture.
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