FTSE Russell boosts NSE’s global standing

March 2024 has marked the dawn of a new era for Kenya’s equity market as the FTSE Russell Index Governance Board elevated the Nairobi Securities Exchange (NSE) classification from “restricted” to “pass” in relation to the investment of capital or the repatriation of capital and income.

This advancement, a direct outcome of the FTSE equity country classification interim review, positions the country’s equity markets on a journey toward meeting stringent international standards.

The upgrade was paved by the Kenyan equity market’s resolve to address and rectify previously reported hurdles, notably the delays institutional investors faced in repatriating capital from Kenya.

Upon fixing the challenge, the lifting of restrictions on the implementation of index changes for Kenyan securities within FTSE Russell equity indices was undertaken in September 2023. This move tips Kenya as a reliable and appealing investment destination globally.

The backdrop upon which this upgrade unfolds is equally compelling. Before this milestone, NSE had been grappling with a trend of capital flight, with a consecutive five-month withdrawal streak by foreign investors that stretched into January 2024.

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Capital flight at the NSE

This withdrawal, amassing Kes178.2 million from the NSE, was part of a broader stretch of exits amounting to Kes21.2 billion in 2023 according to data from the Capital Markets Authority, as investors sought better returns in advanced economies.

FTSE Russell’s classification illustrates that Kenya’s equity market is maturing, marked by enhanced transparency, improved liquidity, and increased investor confidence.

NSE’s reclassification was backed by FTSE Russell’s external advisory committees and the FTSE Equity Country Classification Advisory Committee. These bodies have underscored the upgrade as reflective of the global investor community’s renewed faith in Kenya’s market.

Mr David Wainaina, the acting CEO of the NSE, said the upgrade is a “demonstration of the confidence international institutional investors are placing in our market.”

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