Investing at the Nairobi Stock Exchange
The Nairobi Stock Exchange is a market like any other market but whose goods on sale are shareholding on the listed
companies. Shareholding means part ownership and as such, for any shares of a company that you as an investors purchase,
you become a part owner along with all other investors in that company.
The market currently has 52 listed companies all classified under two main segments based on the categorization
i.e. Main Investment Market Segment (MAIMS) and Alternative Investment Market Segment (AIMS) and 4 sectors depending
on the industry that the companies operate ie. Agricultural; Commercial and Services; Finance and Investment; Industrial
and Allied.
Price movement on the market is largely determined by supply and demand of shares whose balance largely depends on such
factors as company performance, company corporate action, any material news on the companies and the general economic
standing of the company.
Buying and selling of shares
Buying and selling of shares can only be done through authorized stock brokers who in turn work through agents to assist
clients' access the market. To invest on the stock exchange, you need to open a Central Depository and Settlement (CDS) Account.
This is quite like a bank account but whose funds equivalent is your shares.
To open the CDS account, you need to forward a copy of you ID/Passport and two passport size photos then execute the
forms that facilitate the opening of this account. The forms can be picked at any authorize agents office.
Opening the account costs you nothing but facilitates your purchasing and selling of shares on the Stock market.
The minimum number of shares that you can purchase on the stock Exchange is 100 shares and as such, the minimum value will
depend on the number of shares being purchase. 100 shares of Mumias Sugar shares at Kshs. 52 would require a minimum
of Kshs. 5,200 while the purchase of Kenya Commercial shares at Kshs. 220 would require a minimum of Kshs. 22,000
Making gains on the Stock Exchange
There are two ways in which an investor makes money on the stock market;
- Capital gain - sale of shares at a higher price then the purchase price.
- Dividend Gain - Company profit sharing through the distribution of dividends to shareholders.
Transaction charges
Every transaction on the stock exchange attracts a commission of 2.1% for any transactions worth below Kshs, 100,000
and 1.8% for any transactions above Kshs. 100,000. The commission on a purchase of 100 KCB shares at Kshs. 220 would
amount to KSHS. 462 (22,000X0.021), bringing the total amount to be forwarded for this purchase to Kshs. 22,462.
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