Umeme Nairobi Cross-Listing Meets Poor Reception

Umeme

VENTURES AFRICA – Ugandan electricity distributor Umeme launched on the Nairobi Securities Exchange (NSE) on Friday to weak uptake, as cross-listing in the East Africa region suffers due to lack of infrastructure and regulation.

Umeme launched its NSE listing on Friday, but saw zero trading on Friday as investors were deterred by the difficulties encountered with cross-listed entities in the East Africa region.

It had been intended that by cross-listing on the Nairobi as well as the Ugandan bourses, Umeme would facilitate trading of Umeme shares, improving liquidity of the stock while offering investors multiple platforms to manage stocks and trading.

However, given the lack of infrastructural support available across the region, investors have not been able to access and transfer stocks from one bourse to another, thus putting off potential investors from becoming involved with cross-listed stock in the knowledge that trading in the region will be challenging.

Job Kihumba, an executive director at Standard Investment Bank has described the investors’ sentiments, saying: “As an investor, I should be able to access my assets from any of the markets just like in the banking system and the regulators and market operators should fast-track this. It has taken a very long time,” reports Business Daily.

Regulators in Kenya are working on facilitating cross-border trading by developing an appropriate structure – currently set to involve investors creating an electronic account for stock purchases abroad, transferring assets into a physical certificate which may then be presented for conversion back into electronic stock in Nairobi.

According to Peter Muthaura, acting chief executive officer of the Capital Markets Authority, the proposed structure is under review by the regulators with implementation expected to begin towards the end of the first quarter 2013.

Noting that the structure will streamline the trading of stock across borders in the region, Muthaura added: “This will really be the tool to make sure we are able to efficiently trade securities across borders in multiple exchanges through multiple depository agencies.”