By Peter Egwuatu
Chief Executive Officers, CEOs of stock exchanges in Nigeria, Pakistan and Kenya have moved for strict regulations in order to drive liquidity in the stock markets.
The CEOs of the exchanges stated this during a second day panel discussion at the 7th Annual EFG Hermes London Conference.
According to a statement made available to Vanguard, the CEOs of the exchanges stated that regulators shoud create the framework for investor confidence.
Noting the recent development of domestic capital pools in the form of buoyant pension and mutual fund industries across their respective markets, Haroon Askari, Acting Manager Director of the Pakistan Stock Exchange and Geoffrey Odundo, CEO of the Nairobi Securities Exchange pointed to the key role played by regulators in increasing liquidity.
Odundo said: “The regulators have been very supportive. For instance, we recently launched an ETF, for which window has already been created – they’ve been very proactive in helping with this. The regulator is also very committed to having pension funds enhance liquidity in the market. They are looking at how direct property ownership can be reduced from 20 per cent to 2 per cent to support the Real Estate Investment Trust (REIT) market.”
Askari , agreed suggesting regulation was important in creating trust: “One factor which brings liquidity is the perception of a well-regulated market where investors are protected by the rules. Our regulator has done a wonderful job by bringing in new acts to strengthen the legal infrastructure. When you improve the integrity of the market you get new clients and when you get the trust of your clients you get liquidity.”
The CEOs of the three exchanges further maintained that a steady pipeline of Initial Public Offers, IPOs was key to market development.
Askari went on to note the importance of a healthy queue of new prospects for investors: “You have to have enough new IPOs in the region. If you are getting a flow of IPOs, you get new clients and everything that goes with that. If you have a stable market with a high level of integrity and a good pipeline of new IPOs, liquidity will automatically improve” he said.
Commenting on technology in driving the market, the CEOs of the three exchanges stressed the need to increase access and education for retail investors. In Nigeria and Kenya, increased technological capabilities offered by mobile devices were singled out as having drawn in an area of the market currently massively outweighed by institutions.
Onyema, of the Nigerian Exchange elaborated: “Ease of access to the market is very important.
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