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Chinese shares listed in New York and the upcoming initial public offerings (IPOs) in Kenya could attract retail investors in the east African nation as concerns over a global recession persist, says the CEO of Hisa Technologies, a mobile stock-trading platform operator based in Nairobi.

“Shares of up to 10 state-owned companies will likely be listed this year on the Nairobi Securities Exchange (NSE) as a part of the government’s privatization efforts. Local traders are closely watching these domestic IPOs,” Eric Asuma said in an interview with Nodo News.

Listing of the companies on the bourse gives shareholders an opportunity to transact in more shares. It also allows them to share risks and benefits from any rise in NSE’s value.

More IPOs Mean Higher Trade Volumes at NSE

Last October, Kenya’s president William Ruto said his government would bring to the bourse through IPOs between six and 10 companies. He urged the private sector to list at least five companies to boost the Nairobi bourse. Before then, NSE had its last IPO in 2015. There are currently 63 companies listed on NSE.

The government plans to release a list of some of these companies in due course, perhaps in March. It holds between 30% and 50% of shares in most listed companies and would wish to relinquish them through IPOs.

Through the IPOs, the state-owned companies including Kenya Pipeline Corporation (KPC), Kenya Ports Authority (KPA), and Coca-Cola Bottlers, could then be open for public investment through shareholding. As at Feb. 2, the market capitalization of NSE was $16.1 billion according to the World Federation of Exchanges.

In September 2022, the World Bank reported that because central banks across the globe were hiking their interest rates in response to inflation, the world could in turn be hurtling towards a global recession in 2023.

Findings of another World Bank study indicate that this would result in falling stocks, and stunted economic growth. It is likely to evoke a financial crisis not just in emerging markets but also in the developed nations. The damage could be lasting especially in developing countries and emerging markets.

Asuma says the general implication of these events would be an all-around recession at some point in the course of the year. That would mean that some stocks, especially US stocks, would be adversely affected.

Chinese Stocks are Performing Well

(People commuting in Nairobi, Kenya / Nodo News)

Some of the Chinese cross-listed stocks, to a considerable extent, are performing well. Investors hope the trend will continue. Asuma’s platform, Hisa, facilitates stock trade across major brands globally.

Financial researchers are optimistic that China’s long-term economic growth will experience a surge even during the recession. This is largely based on investment growth in the manufacturing industry and an anticipated easing of its covid-19 strategy.

Many investors are expected to consider these stocks for investment. And such are the stocks that most of the Hisa platform’s users would be focusing on.

“And I think what we need to try to do for these users is to encourage them to look at exchange-traded funds (ETFs). Many users are in fact investing in ETFs,” says Asuma. “For users investing in the Treasury bonds – especially now that we are anticipating a recession – we try to find ways in which we can educate them on some of those ETFs so that they can easily ‘preserve’ their investments even amid the recession.”

Rebalancing Portfolios

The goal would be for investors to rebalance their portfolios according to how the dynamics change. That is to avoid being fixed on one stock even when it is not making returns. Many stock buyers believe diversification into stocks that are performing both for the short-term and the long-term is more valuable.

The government’s proclamation on listing more companies in the bourse presents an opportunity for Kenyans to invest more in stocks.

“We are therefore anticipating some activity in the NSE. If the US or other European countries are in recession, it presents an opportunity for other emerging markets to have capital inflow,” Asuma says. More listings and IPOs are expected to herald a vibrant NSE.