Kenya will diversify its market products and increase the number of listings to boost its financial index score, NSE chief executive Geoffrey Odundo has said.
This follows the country's drop in an index that measures the capacity of countries to attract investors in Africa.
According to the fifth edition of the Financial Markets Index by Absa Africa, Kenya dropped to position 11 from position seven last year, scoring 47 points out of 100, the least in five years.
The drop was attributed to the low capacity of retail investors and slow enforcement of standard financial markets master agreements.
Odundo said the initiatives would boost Kenya's financial market and help it improve on the pillars that saw its score drop.
The report produced by Absa Group and Official Monetary and Financial Institutions Forum, rates countries based on market depth, access to foreign exchange and market transparency.
Other parametres are tax and regulatory environment, capacity of local investors and legality and enforceability of standard financial markets master agreements.
Kenya's score dropped in five out of the six pillars.
The country scored poorly on capacity of local investors, scoring 24 points to rank position nine in the continent.
“To improve in this pillar we are continually diversifying our products while simplifying them to attract a longer pool of investors and counter various market risks,” said Odundo.
Currently, the Nairobi Securities Exchange (NSE) has derivatives market, exchange-traded fund(ETF), real estate investment trusts(REITs), data business, M-Akiba, and the securities platform.
Odundo said that the NSE plans to increase the number of listed firms to 100 to reduce the concentration risk held by the NSE top 5 which include Safaricom, KCB, Equity Group, East African Breweries and Cooperative Bank.
Kenya also lost a point on the market depth pillar to score 46 from 47 last year.
This was partly attributed to the impact of Covid-19 on NSE market capitalisation and activity.
According to Odundo, this pillar will improve as the market continues to recover from the effects of the pandemic and capitalisation continues to grow.
“Market capitalisation increased by 27 percent while turnover dropped and this saw the market depth ratio drop by 31 per cent but this will improve,” he said.
On legality and enforceability of standard financial markets, Kenya slipped from sixth to position eight after only 28 points.
The country scored 45 points on the foreign exchange pillar in comparison to 57 scored last year, condemning it to opposition 13.
The foreign exchange pillar evaluates a country’s openness to foreign investment based on the ease of moving capital, the flexibility of foreign exchange regimes and the availability of reliable foreign exchange data.
Even so, Kenya performed excellently in the third pillar on market transparency, jumping from position nine last year to three this year, having scored 79 percent.
The high score illustrates the country's effort in streamlining its tax and regulatory environment.