CMA (Capital Markets Authority) has approved the listing of the WSA Banking Index ETF on the Nairobi Securities Exchange (NSE). This marks a significant milestone for Kenya’s capital markets as the Kenya’s first locally-domiciled ETF.
This brings to three the number of Exchange Traded Funds that have already been approved by CMA to the listed at the Nairobi bourse.
The other two Funds approved by CMA are Absa NewGold ETF, which tracks the price of physical Gold and the Satrix MSCI World Feeder ETF, which tracks large and mid-cap global equities across developed markets.
Tradium Asset Managers will serve as the Fund Manager. The ETF is structured as an open-ended scheme whose units are listed and traded on the NSE.
According to a note from CMA, the ETF will seek to replicate the performance of the designated NSE Banking Index by investing all its assets in the constituent banking sector shares comprising the Index.
CMA Chief Executive Officer Wyckliffe Shamiah said that the rollout of this innovative ETF product is aligned to the Authority’s ambition of facilitating curation of innovative products in the capital markets space.
CMA aims to meet demand for more products by investors
This is expected to address the growing demand for innovative products, allowing investors diversify their portfolios and deepen capital markets through an expanded scope of products.
The value of the ETF units will fluctuate in line with changes in the market value of the underlying banking sector shares and may be affected by factors including equity market volatility, interest rate movements, changes in the operating performance of constituent banks, regulatory developments and broader macroeconomic conditions.
The WSA Banking Index ETF is the first locally-domiciled ETF, and is issued by the Wallstreet Africa Group Limited, the company behind the Kenyan Wallstreet and the Wall Street Africa ecosystem, a financial media house and fintech business.
Issued by Wall Street Africa in partnership with Tradiam Asset Managers, the CMA-licensed ETF will track the NSE Banking Index, giving investors diversified exposure to 11 listed Kenyan banks through a single investment vehicle.
The development could broaden access to the banking sector while providing investors with a more diversified and convenient way to participate in the performance of listed banks.
The WSA Banking Index ETF will track the NSE Banking Index, with CMA identifying 11 listed banking groups as the underlying constituent universe. The Banks are:
- Equity Group
- KCB Group
- Co-operative Bank of Kenya
- Absa Bank Kenya
- NCBA Group
- Standard Chartered Bank Kenya
- Stanbic Holdings
- I&M Group
- Diamond Trust Bank Kenya
- HFCB Group
- BK Group
Family Bank is not yet part of the ETF constituent universe. It will have to wait longer before becoming eligible for inclusion because it needs to have traded on the NSE for at least six months before meeting the index’s seasoning requirement.
The ETF is denominated in Kenya Shillings and the underlying banking sector shares are listed and traded also in Kenya Shillings. Investors will therefore be exposed to foreign exchange risks.
The ETF units will be listed and traded on the NSE. Liquidity in the secondary market may be supported by appointed market makers or authorised participants, who facilitate the creation and redemption of ETF units and help maintain orderly trading.
An ETF is a listed investment product, which tracks the performance of a particular index (e.g. NSE 20, NSE 25) or “basket” of shares, bonds, money market instruments or a single commodity.
These are known as underlying securities or assets. ETF are traded on an exchange just like an ordinary share and the price of a particular ETF will be determined by the demand and supply of the ETF.
An ETF can be a domestic or offshore product
Types of exchange- traded funds
- Index ETFS– Most ETFs are index funds that attempt to replicate the performance of a specific index. Indexes may be based on stocks, bonds, commodities, or currencies. An index fund seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index.
- Bond ETFs– They invest in bonds. They thrive during economic recessions because investors pull their money out of the stock market and into bonds (for example, government treasury bonds or those issued by companies regarded as financially stable).
- Commodity ETFs (ETCs) – Invest in commodities such as precious metal, agricultural products and hydrocarbons.
- Stock ETFs–This was the first and most popular ETFs. This type of ETF owns funds from other stocks.
ALSO READ: Absa NewGold ETF Investors Win Big as Global Gold Prices Surge
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