Investors will have an opportunity to own a portion of banking sector shares traded at the Nairobi Securities Exchange through a single investment vehicle after the Capital Markets Authority gave nod to an Index Exchange Traded Fund (ETF) to be listed on the bourse.
The Wall Street Africa (WSA) Banking Index ETF will package listed bank stocks in one investment unit set to be listed in October after it is approved by the Nairobi Securities Exchange (NSE).
Family Bank, which was listed in May this year, is the only lender that will not be included in the ETF as it is yet to trade for six months.
The banks, whose prices range from Sh339 for Standard Chartered to Sh13.05 for HFCB, will be weighed in the ETF based on their market capitalisation.
“We will have a listing price but because we haven’t finished the whole process we cannot give the actual price; we also need approval from NSE but we intend to list mid-October,” said Eric Ruenji, the chief executive of Tradiam Asset managers – the fund managers of the ETF.
“The initial price will be affordable enough so that any person out there can be able to own across the banking sector by just holding a single stock of the ETF,” he added.
Banking stocks are some of the best performing counters on the NSE riding on their financial performance. As at the month of May the industry had recorded a profit after tax of Sh141 billion which was a 14.3 percent growth compared to the same period last year.
The eight large banks in the country, which dominate the industry holding more than 75 percent of its assets, are listed on the NSE and will form part of the ETF.
The ETF will provide investors with exposure to the performance of a diversified portfolio of listed banking sector equities. The investors are expected to benefit from price gains and dividend payouts.
The value of the ETF units will fluctuate in line with changes in the market value of the underlying banking sector shares and may be affected by factors including equity market volatility, interest rate movements, changes in the operating performance of constituent banks, regulatory developments and broader macroeconomic conditions.
The WSA Banking ETF is issued by Wall Street Africa in partnership with Tradiam Asset Managers Limited, who will serve as the fund manager.
“The rollout of the innovative ETF product by Wallstreet Africa Group is aligned to the authority’s ambition of facilitating curation of innovative products in the capital markets space,” said CMA chief executive Wyckliffe Shamiah.
“This is expected to address the growing demand for innovative products, thereby allowing investors to diversify their portfolios and deepening the capital markets through an expanded scope of products,” he added.
Wallstreet Africa Group, founded by Eric Asuma, is the company behind the Kenyan Wall Street, a financial media company and fintech business.
This will be the third ETF listed on the NSE but the first locally-domiciled one. Absa NewGold ETF, which tracks the price of physical gold, and the Satrix MSCI World Feeder ETF, which tracks large and mid-cap global equities across developed markets are domiciled in Johannesburg Stock Exchange.
WSA and Tridiam will have to buy shares across different counters which will serve as seed capital from which they will structure the ETFs units. The ETF is structured as an open-ended scheme meaning it can continue absorbing as many shares as possible from the market.
ETFs are common products in developed markets as they spread out risk and ease volatility.
