Saturday, April 21, 2007

Reform and Prosper

File this one under: Confirmation of the Obvious. It turns out stock market reforms are indeed a pretty good thing for pretty much everyone concerned.

World Bank researchers recently released a study on the long-term impact of market reform measures like insider trading laws, automated trading systems, and allowing foreign investment. They found that each reform correlated with increased levels of market capitalization, liquidity, and capital-raising.

The findings should be heartening to Nairobi Stock Exchange (NSE) investors. Why? Because the NSE recently launched an automated trading system, and privatization of Kenya’s state-owned companies continues apace. Moreover, Kenya’s Capital Markets Authority (CMA) has just proposed a raft of reforms to the rules governing the NSE. These regulations include increased penalties for insider trading, disclosure requirements for brokers, and investors’ indemnity insurance.

So, according to this research, the good times on the NSE could roll for quite a bit longer.

But Kenyans may find another of the study’s conclusions rather more bittersweet. The more successfully a market reforms, the more attractive its participants become to the global market. Safaricom, anyone?


Anonymous said...

Having Safaricom list elsewhere is not a cause for major concern. That only puts the Nairobi exchange in the same boat as the rest of the world exchanges. In this new competitive capital markets environment, companies need to seek the best listing location. The rewards will be felt at home.


I like the sound of the post title.