Kenya starts FTSE-based stock indexes, eyes bonds

Nairobi Securities Exchange has launched two stock indexes in conjunction with FTSE Group, and said on Tuesday it planned to start one for Treasury bonds next year.

The FTSE NSE Kenya 25 Index will comprise the bourse's 25 most liquid stocks, while the FTSE NSE Kenya 15 Index will be made up of the exchange's 15 largest stocks by market capitalisation.

The two tradable indexes, which went live on Tuesday, will be priced in dollars and Kenyan shillings, and will initially be based on the NSE-20 Share Index and the NSE-All Share Index.

They reflect the growing interest in new domestic investment and diversification opportunities in Kenya, NSE chief executive Peter Mwangi said.

The top five constituents of the FTSE NSE Kenya 25 Index are alcoholic drinks group East African Breweries Ltd, telecoms operator Safaricom, Equity Bank, Kenya Commercial Bank and Barclays Kenya. They have a total 69.19 percent weighting.

The five firms are also the top on the FTSE NSE Kenya 15 Index and have a total of 71.91 percent weighting. Both indexes have January 1, 2008 as their base date and their composition will be reviewed every June and December.

FTSE operates such indexes as the FTSE 100 in Britain. In Africa, it runs indexes in Morocco and South Africa. It also operates ETFs in countries including China, Germany, Japan, and the United States.

NSE and FTSE plan to launch a Treasury bond index in 2012.

It is something we are working on. I hope we will make an announcement very early next year about that index, said Jonathan Cooper, FTSE Group managing director for Middle East and Africa.

The Nairobi Securities Exchange has said the FTSE indexes were meant to pave the way for products like exchange traded funds.

An ETF comprises a basket of assets, usually the main constituents a major share market index, and can be traded on an exchange, sold short or bought on margin. ETFs trade like stocks and allow investors to diversify risk over a spread of assets.

The regulatory framework for issuing exchange traded funds domestically is not ready. So, we are working with the authority to have those regulations in place next year, said Donald Ouma, NSE head of market and product development. However, with FTSE, one can get a licence to issue exchange traded funds offshore.