NSE (Nairobi Securities Exchange) has gained in global ratings after New York Based Morgan Stanley Capital International(MSCI) added listed CIC Insurance and Williamson Tea, to its global indices.
NSE listed CIC and Williamson Tea joined the MSCI Frontier Markets Small Cap Index captures small-cap representation across 28 frontier markets, covering about 85% of the free float-adjusted market capitalization in each country.
The inclusion of CIC Insurance and Williamson Tea in this index reflects the growth potential of Kenya’s listed equities and is expected to increase appetites of international investors to the NSE.
NSE firms represented in the MSCI Frontier Markets Small Cap Index include KenGen, British American Tobacco (BAT) Kenya, Diamond Trust Bank Kenya, Kenya Reinsurance, Kenya Power, Carbacid Investments Plc and Bamburi Cement.
The uploading of CIC Insurance and Williamson Tea brings the total number of NSE listed in the index to nine.
At the end of this trading week, the NSE Market Capitalization hit KSh 3,044.07 Billion, climbing above the KSh 3 trillion mark for the first time in years.
Investment analysts and insiders attribute increase in paper wealth at the NSE to strong earnings and fat dividends from Blue-Chip firms, strong investor appetite for equities as returns from Government paper dwindles, a stable Kenya Shilling exchange rate, lower inflation expectations and hot money from fly-by-night foreign investors.
A rise in Market Cap, total market value of all listed shares at the NSE, reflects rising investor confidence and appetite, on the back of increased corporate earnings and strong performance of banking, telecoms and manufacturing sectors,
What Investors need to know about MSCI Global index:
This global representation of listed firms in Kenya has the potential to drive substantial capital inflows to the NSE and provide global exposure to both the bourse and the listed companies.
The inclusion of CIC Insurance and Williamson Tea in this index reflects the growth potential of Kenya’s listed equities and may attract more international investors to the NSE
Inclusion in the MSCI index can increase the visibility of these companies among international investors, potentially leading to more investment opportunities and capital inflows.
As more investors become aware of and invest in these companies, liquidity in the market may improve, making it easier for investors to buy and sell shares.
Being part of a reputable index like MSCI can enhance the credibility and reputation of these companies, potentially leading to more business opportunities and partnerships.
The increased visibility and credibility of the two firms can also lead to potential for growth, as more investors become interested in them.
On the flip side, the nine companies have become more integrated into the global market, making them more susceptible to global market fluctuations, potentially leading to increased volatility in their stock prices.
NSE investors now put higher expectations on these counters, them being part of a prominent index which can be challenging for the companies to meet, potentially leading to stock price fluctuations.
If a significant portion of these companies’ shares are held by foreign investors, they may be more vulnerable to changes in global market sentiment, potentially leading to capital outflows.
Being part of a major global index may require these companies to comply with additional international reporting and governance requirements, which could be an added cost to them.
What is a MSCI Frontier Markets Index
This index is used to track markets in countries that are considered more volatile and unpredictable than emerging markets. This index focuses on 28 markets from the Middle East, Africa, South America, and Europe.
The Nairobi bourse is grouped with other frontier regions with stocks included in this index are Vietnam, Morocco, Iceland, Romania, and Bahrain.
The NSE is classified among frontier markets which are seen as profitable, with headroom for growth. However, the Nairobi bourse just like its peers, is not heavily traded, making it illiquid thus making it difficult for foreign investors to offload if the economy takes a downturn due to global or local factors.
What MSCI provides
MSCI is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.
MSCI is best known for its benchmark indexes, including the MSCI Emerging Markets Index and MSCI Frontier Markets Index.
Its stock indexes, which focus on different geographic areas and stock types, such as small-caps, mid-caps, and large-caps, track the performance of the stocks that are included in them and act as a base for exchange traded funds, similar to the one listed at the NSE.
Available data shows that as at December 31, 2024, US$16.9 trillion in assets under management where benchmarked to the MSCI indexes.
MSCI offers more than 246,000 indexes with the most widely used being Emerging Markets Index, Frontier Markets Index, All Country World Index, and EAFE Index.
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