The Capital Markets Authority has launched a product that will enable domestic firms issue shares in other countries without cross-listing on the stock exchange in those countries.
CMA has approved rules for the listing and trading of global depository notes and receipts as part of the authority’s 10-year capital markets master plan, geared towards diversification of Kenya’s capital markets.
“The policy guidance note underpins industry’s efforts to develop and deepen capital markets products and services and provide a facilitative environment for cross border investments,” CMA chief executive Paul Muthaura said.
CMA’s Soundness Report for the first quarter 2017 showed that Kenya’s capital market was stable due to diversification brought about by the issuance of new products such as the listing of 400,000 gold bullion Debentures of South African NewGold Issuer Ltd on the Nairobi Securities Exchange, the government’s M-Akiba retail bond and the prospect of the corporate bond issues comeback after the offering by East African Breweries.
According to CMA a global depositary receipt or note is a negotiable certificate issued, listed and traded on a securities exchange. The certificate represents securities issued in another country.
Where the certificate represents ownership of bonds instead of shares, it is referred to as a global depository note.
The global depository receipts are seen as vehicles to support growth of the country’s national savings and investments from less than 15 per cent of gross domestic product to 30 per cent as stipulated in the Vision 2030.
Debt issued in foreign markets and depositary notes in Kenya will be denominated in the Kenya Shilling, thus eliminating currency risk for the investors.
“Kenyan companies will be able to issue GDNs into foreign markets to tap liquidity and appetite in those markets while remaining denominated in Kenya Shillings, thereby providing an alternative to the currency risk of Eurobonds,” Muthaura said.
In May, the regulator said it partnered with Citibank to create global depository receipts aimed at deepening the domestic market.
“The idea is we create the global depository notes where we can attract a local currency-denominated investment to a global market and they trade in a global environment,” Citibank East Africa chief executive Joyce-Ann Wainaina said.
The depositary receipts listed and traded at the NSE, will be admitted to the main investment market segment.