This archive report was first published on 4 August 2020.
Published on August 4, 2020, a report highlighted the importance of liquidity in African markets, citing challenges such as limited free-float, poorly diversified investor profiles, and complex market access models.
According to the report, majority of exchanges in Africa have liquidity levels below one per cent, with only two exchanges recording levels of over 10 per cent as of May 2020 - Egypt 48 per cent and Johannesburg (45 per cent). These exchanges have wider pools of listed companies and relatively higher market capitalisation.
However, other African markets, such as Nigeria, have listed companies among the highest in Africa, but share turnover velocity - a measure of liquidity - is lower than both Morocco’s and Mauritius’. The latter have turnovers of six per cent and eight per cent with the number of listed companies as 75 and 98 per cent respectively.
Efforts to boost liquidity include the introduction of market makers or liquidity providers, which will eliminate lags in execution, and education initiatives such as an informative TV show and e-learning platform launched by the Nairobi Securities Exchange (NSE).
The NSE has also launched a new mobile trading platform to facilitate trading through sponsored direct market access, available for download at the Google Play Store for Android users and App Store for iPhone users.
These measures aim to grow the number of retail investors significantly in line with NSE’s 2020-2024 strategy and achieve its Capital Markets Master Plan targets, including equity market capitalisation to GDP of 70 per cent and corporate bonds outstanding to GDP at 40 per cent.
