Nairobi — The number of retail investors participating in Unit Trusts has risen significantly over the past decade driven mainly by the use of technology that has seen market players attract more clients, a new report shows.
According to the CMA Q4 Soundness report, the number of retail investors in capital market products rose to 300,000 as of September 2022 from 84,000 in September 2012.
This has led to a 5- fold increase in Assets Under Management (AUM) by CISes to more than Sh155 billion as at the end of the quarter under review, compared to the corresponding period in 2012.
CMA notes that the increase in retail investors has also been fueled by the approval of more fund managers and asset classes under umbrella Collective Investment Schemes (CIS).
In recent times, a number of firms in the markets have leveraged technology to avail capital markets-related products to investors.
Four of these firms were admitted and successfully graduated from the CMA Regulatory Sandbox, they include Chumz App, Innova Limited, FourFront Management, and Hisa App.
According to the market regulator, digitalization and the use of social media has reshaped the way financial products are marketed and distributed and this has eased access to a broad range of financial products, particularly by retail investors.
"Robo advisers, online brokers (digital brokers), investment apps, and web portals have multiplied the opportunities for retail investors to invest and trade in securities," said CMA.
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Despite the increased investment from digitalization, CMA noted that various risks have emerged arising from the fast-paced nature of continuous innovation, the use of emerging digital technologies, and the complexity of capital markets products and services that has not been accompanied by a proportionate increase in financial consumer education.
CMA tasked the capital market players to learn how they can market their products online without causing investor harm.
The Authority committed to continue supporting fintechs that seek to promote the uptake of capital markets products, especially by domestic retail investors.
Overall, in the quarter under review, local investors at the NSE hit 2 million while foreign Investors were 14,877. Investors from East Africa stood at 9017.
The equity turnover ratio in Q4 reduced by over 29 per cent, from 0.84 per cent to 1.08 per cent, reflecting lower market liquidity.
"Foreign investors who account for a significant contribution to equities turnover shied away from the Kenyan capital markets as they chased yields in safer jurisdictions," CMA noted.
The foreign net equity outflow during the quarter however reduced to Sh4.87 billion compared with the Sh6.97 billion recorded in the previous quarter.
