The Nairobi Securities Exchange (NSE) has introduced a new trading regime known as fractional trading where minor-league investors will now be at liberty to acquire a part of their fancied but prohibitively priced company stocks, as the bourse looks to whip up Kenyans’ enthusiasm in stock trading and boost activity.
In the legacy securities trading system, investors can only partake in stock trading once they raise the amount of money required to buy a listed company’s minimum amount of shares.
For instance, to invest in stocks at the NSE, one needs raise enough to purchase a minimum of 100 shares. This would require at least Kes16,250 shillings to purchase EABL shares at Monday’s trading average of Kes162.5 per share.
However, the new provision allows small-time investors to buy less than a whole share of stock, opening the way to equities that are otherwise considered out of reach due to high prices.
“(Conventional stocks) will be broken into fractional stocks, so that you are able to buy the same share at smaller amounts,” said NSE Chairman Kiprono Kittony, adding that splicing of shares is necessary in cases where shares are very expensive to make them affordable to the public.
Mr Kitonny clarified that fractional investment on Kenyan stocks will be the niche of Hisa, the recently launched mobile stock trading app that allows users to invest in local and international stocks.
“So this is the space that Hisa has identified and would like to fill up,” he said.
“Bringing the youth into the market is one thing that we are really keen on… fractional trading is the direction we want to take. We have stocks here that cost Kes2000, and Kes700… there is need for us to break that into smaller bits and pieces,” NSE Chief Executive Geoffrey Odundo said at the launch of Hisa App.
Also in the works, according to the NSE Chairman, is an arrangement in which investors will be able to buy fractions of bonds.