By James Anyanzwa
Key stakeholders in the capital markets are raising concerns over the growing emphasis on compliance with new regulations rather than development of the market.
Amish Gupta, a director at Standard Investment Bank, notes that over the last five years, the market has stagnated in terms of growth while implementation of a number of ambitious projects meant to deepen the market is moving at a snail’s pace.
Gupta singled out the proposal for the introduction of the Over-The-Counter (OTC) trading of equities, Asset Backed Securities (ABS), Exchange Traded Funds and Derivatives Market, saying their delayed implementation is stagnating the market.
This, he said, is inhibiting the capital markets to attain its targets such as raising the level of savings to the gross domestic product (GDP) to 30 per cent and the level of investments to GDP to 34 per cent.
Other targets include raising the proportion of stock market capitalisation to 90 per cent of the GDP and bond market capitalisation to 30 per cent of the GDP.
Gupta noted that over the last five years, market capitalisation and turnover on the equity market have stagnated while the number of buyers and sellers constitute just a small proportion of the CDS accounts.
In May this year, the number of CDS accounts stood at 1.9 million, market capitalisation at Sh1 trillion, turnover (Sh8.8 billion), number of transactions (28,000) and turnover ratio (0.88 per cent).
“Over the last five years, we in the capital markets have had hundreds of pages of new regulations. Some of us are still digesting these regulations to see how they are going to be implemented by the industry,” said Gupta.
Gupta was addressing stakeholders from the financial sector during a financial services conference in Nairobi last week.
He noted that introduction of short selling, margin trading and online trading concepts including the listing of the Sh29 billion worth of Unit Trusts could revolutionise the market which has in the past suffered from exodus of retail investors.
He said the proposed initiatives could modernise the market with increased optimism that a well-structured system could position the local market to levels that it could rival the Far East Asian tigers.
