Saturday, July 2, 2022

NSE to allow foreign investors own 100 per cent of local companies

Kenya is relaxing strict capital controls by allowing foreign investors increase ownership in local firms to raise billions of shillings needed to jump-start massive infrastructure developments.

The Capital Market Authority (CMA) yesterday said a new master plan being developed will fully open up the country’s securities market and allow foreign investors increase shareholding up to 100 per cent in domestic companies.

The move will boost foreign direct investments (FDI) and support creation of more jobs in the economy by making the capital market more attractive to foreign institutions.

Already, the authority says it will leverage on the Morgan Stanley Capital Index (MSCI) to help Kenya join the list of international investors. The index will also be used to benchmark and monitor exposure of Kenya’s securities exchange and international peers.

“Constraints on foreign room level in certain issues — especially where there are large non-traded blocks held by foreign strategic investors — caused by the foreign ownership limits and inadequacies in post-trade infrastructure pose a greater problem in the future as the market develops,” said CMA acting strategy director, Luke Ombara.

Capital market’s penetration is currently between five and eight per cent, which is a significant rise from less than one per cent witnessed 15 years ago. Ombara said the shift is expected to be done progressively before official roll out in 2016.

However, State corporations recently authorised to trade at the bourse and the economy’s ‘jewels’ like Safaricom will not give up their entire stake, the capital markets regulator said. “These companies may have difficulties in fully opening up to the investors. National Treasury will handle such cases,” he said.

Contributions of foreign companies to overall secondary equities trading have grown to between 50 to 70 per cent over the past two years. According to United Nations Conference on Trade and Development World Investment Report 2014 FDI inflows in 2013 stood at Sh45.18 billion ($514 million) a 98 per cent growth from Sh22.7 billion ($259 million) a year attributed to oil discovery.

 

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