4 October 2017

Kenya: Bond Turnover at NSE Flat in First Nine Months

Bond turnover at the Nairobi Securities Exchange (NSE) through the first nine months of the year was flat compared to 2016, with investors increasingly looking towards a recovering equities market for higher returns.

NSE data shows that bond turnover in the secondary market stood at Sh342.9 billion in the first three quarters of this year, up by just Sh2.1 billion from the Sh340.8 billion recorded in a similar period last year. In the third quarter of the year, bonds turnover stood at Sh105.4 billion, down from Sh131 billion recorded in quarter two and Sh106.5 in quarter one.

"The secondary bonds market recorded reduced activity in quarter three of 2017, with turnover decreasing by 19 per cent from the turnover recorded in quarter two; but increasing marginally by 0.7 per cent from Sh103.9 billion recorded in quarter three of 2016," said Cytonn Investments in their quarter three markets review.

Investors in government securities have been showing a preference for short term paper in the primary market, largely due to uncertainty over the direction of interest rates.

With the market also remaining liquid for most of the year, bondholders have had less incentive to liquidate their holdings.

Banks have also been keen to hold on to their portfolio or add to it as they look for alternative interest income after the rate cap law cut earnings from customer loans. In contrast with bonds, the turnover in the equities market went up by 11.7 per cent in the nine months to September, coming in at Sh135.6 billion compared to Sh121.4 billion in the corresponding period last year.

This increase in equities trading has followed an improvement in share prices across key sectors.

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