A memorandum of understanding MoU between the Nairobi Stock Exchange and Uganda

A memorandum of understanding mou between the nairobi

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A memorandum of understanding (MoU) between the Nairobi Stock Exchange and Uganda Securities Exchange on mass cross listing was signed in November 2006 allowing listed companies in both exchanges to dualist thus enhancing growth and development of the regional securities markets. Some of NSE’s listed companies that have dual-listed include: Kenya Airways, East Africa Breweries and Jubilee Holdings. Benefits that accrue to cross listed companies include: access to a wider capital base across the region, a regional 7
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presence, resulting in a wider acceptance and recognition of the company brand across the region by company stakeholder-shareholders, employees, customers and regulators) and the prestige of a regional listing (The NSE Market Fact File, 2016). NSE facilitates the mobilization of capital for development and provides savers in Kenya with an alternative saving tool. Funds that would otherwise have been consumed or deposited in bank accounts are redirected to promote growth in various sectors of the economy as people invest in securities. NSE can also be used by the government and local authorities as an alternative source of funds to increasing taxes in order to finance development projects. NSE is used as an instrument of privatization and also as an avenue of liberalization of sectors previously dominated by the government (Okoyo, 2012). The Nairobi Securities Exchange (NSE) demutualization in 2014 marked the beginning of a period of rapid innovation in East Africa’s capital markets. The NSE and the CMA took a series of steps to support long-term growth in the exchange as part of the Capital Markets Master Plan (2014-23). Among the initiatives rolled out were new products to boost liquidity and help attract more domestic retail investors, given that only 4% of the population currently participates in the local market. These included exchange-traded funds (ETFs) launched in the first quarter of 2016, derivatives market, new securities settlement platform that features functionalities such as same-day trading, settlement services for government securities, and securities lending and borrowing to facilitate short-selling and other investment strategies. The government also sought to encourage activity on the capital markets in other ways, including rolling back a capital gain tax (CGT) which was reintroduced at 5% on equities and bonds in 2015, reduced to 0.3% withholding tax (The NSE Market Fact File 2016). The dependable variable of interest was Nairobi Securities Exchange development. Indicators of market development include stock market size as represented by market capitalization and the number of listed companies, stock market liquidity, stock market performance/volatility, stock market concentration and stock market linkage to real sector performance. Other proxies of market development are market traded value, and market turnover. Indices used at the NSE include the NSE ALL share index, NSE 20 share index, FTSE NSE Indices (FTSE NSE Kenya 15 index, FTSE NSE Kenya 25 index, FTSE NSE Kenya government bond index and FTSE ASEA Pan African Index). NSE development was measured using market
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