(Bloomberg) — The new East African Bond Exchange, a potential competitor to the Nairobi Stock Exchange, sees the prospect of exponential growth in Kenya’s bond market as it prepares to begin its operations in the first half of this year.
While Kenya has the third-largest economy in sub-Saharan Africa, the value of corporate debt issued represents just 0.2% of its gross domestic product, compared to an average of 20-30% of GDP in Asian countries, according to Terrence Adembesa. , CEO of EABX.
At the same time, he said the government’s domestic debt swap potential is three to four times the 5 trillion shillings ($31 billion) outstanding, instead of the 600 billion shillings negotiated in 2023.
“For an economy of our size, the debt market should be much deeper than it is and much more developed,” Adembesa said in an interview. “What you expect is increased liquidity, increased transparency and transparent pricing.”
Kenya sold $14.9 billion worth of bonds in 2023, up from $14.6 billion a year earlier, according to Bloomberg calculations using official data. At the end of September, there were eight corporate bond issuers outstanding, with a total outstanding of Sh28.4 billion, according to data from the markets regulator.
EABX intends to allow issuers to better value their securities, while investors should “have much more visibility on prices,” Adembesa said. “You would also expect to see savings in terms of trading fees and issuance costs.”
Increase in capital
The exchange, which received its operating license earlier this month, also plans to complete its capital raising in the first quarter of this year. The company received bids totaling about Sh2.6 billion, above its target of Sh2 billion, Adembesa said. About 52% of the purse will be owned by the Kenya Bankers Association and the UK-backed development agency FSD Africa, he said.
“From a system perspective, we are currently doing the testing,” Adembesa said. “We can see some exchanges happening.”
READ: Kenya Capital Markets Regulator Approves EABX OTC Exchange
The origins of the EABX date back to 2009, when the Bond Market Association, a lobby group made up of fund managers, stockbrokers, investment bankers and lenders, decided to create a regulatory body. self-regulation for the fixed income market.
EABX will eventually enable fixed income trading in almost all East African Community member countries. Besides Kenya, these countries include Tanzania, Uganda, Rwanda, Burundi, Democratic Republic of Congo, South Sudan and Somalia.
–With help from Bella Genga.
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