This archive report was first published on 21 October 2019.
On October 16, 2019, Kenya's stock market opened up to increased speculation with the introduction of a new trading system that allows for Short Selling and Day Trading.
The move is part of the World Bank's recommendations to boost liquidity in the stock market, where nearly 90% of the 1.6 million share accounts are dormant and have not been actively trading in the past two years.
According to data from the Nairobi Securities Exchange (NSE), the daily turnover has declined by more than 40% to as low as Ksh361 million ($3.61 million) from Ksh608 million ($6.08 million) in the last 10 months.
Paul Mwai, chief executive of AIB Capital Ltd., said, 'This is a very good move for the market. Investors have always made money when they buy shares and sell them off when their prices go up. However, we have now opened up an opportunity for investors to make money when prices of shares decline.'
Under this trading arrangement, stockbrokers will borrow shares from clients and sell them under the prevailing prices with hopes of buying them back from the market when prices fall and in the process make a profit.
The regulations for Securities Lending and Borrowing transactions were gazetted in January 2018, and the NSE and Central Depository Settlement Corporation upgraded their systems to accommodate it.
