The Kenyan stock market allows both local and foreign investors to own stocks or shares of companies listed by the NSE (Nairobi Stock Exchange).By buying these shares, an investor is poised to make some profit. Trading stocks requires patience and a long-term strategy to build wealth as you will learn in this guide on how to buy shares in Kenya. Without knowledge and a proper strategy in place, an investor risks losing money.
You can buy and sell shares in Kenya in three main ways.
You can use:
a) A stockbroker
b) An online broker
c) An investment manager or a financial adviser
Although it is possible to buy shares through an online broker, in Kenya, only a few exist.
Note: You can only purchase Kenyan securities via a listed stockbroker.
Kenyan stockbrokers have portals where investors can buy shares in Kenya online.
You also need the right documents to start buying shares at the NSE.
First, you will need a Central Deposit and Settlement (CDS) account.
You can open the account directly through the Central Bank of Kenya (CBK) or through a brokerage firm or a client account through authorized dealers that include investment banks, commercial banks, investment advisors, and stock brokers.
It is free to open and maintain a CDS account if you open it directly through the CBK.
As an individual investor, you can open the account either individually or jointly.
This is how it works:
Buy 1000 shares*Kshs 2= Kshs 2,000 plus broker’s fee (2%*2000= Kshs 20), total buying price is Kshs 2,020.
Then sell at 1,000 shares at Kshs 10
1000 shares*Kshs 10=Kshs 10,000, plus broker’s fee (2%*10,000= Kshs200), total selling price is 9,800.
Profit: 9,000-2,000 = 7,600
Now if an investor had 10,000 shares of this stock, they would make Kshs 76,000 just by selling off their shares.
On the day ending 7th July 2020, CIC insurance had its stock trading at Kshs 2.25 a share. This means that if you were to buy the minimum number of shares of this stock this is how much it would cost you: 100 shares *2.25= Kshs 225. Broker’s commission of 2% *225= Kshs 4.5. So to buy 100 shares of CIC insurance you would need 225+4.50 = Kshs 229.5 which rounds off to Kshs 230.
In other words, with Kshs 230, you can start investing in stocks. Undoubtedly, trading shares is a great way of owning passive investments.
Some available resources
The CMA: As an investor, it would be important to visit the Capital Markets Authority website. This is the government body that regulates all the firms operating in this industry. In 2019, they ran a public awareness campaign where participants could win 5,000 and above to invest in the stock market. Keep an eye on their public education campaigns on their website.
Trading on the go: Some stockbrokers have mobile applications which you can use to trade shares on the go. Visit any stockbroker and they will provide you with information at no cost.
Banks: Some banks have an internal department that deals in shares. For instance, KCB bank has KCB Capital and NCBA bank has NCBA Investment Bank that handles the trading of shares. If you have a bank account with these banks you could open a CDS account with them at no charge, and start trading. Check with your bank if they have such a department.
The NSE: The NSE has public information sessions where they engage the public on how to buy and sell shares. The prices of all the listed firms are on the website of the NSE, www.nse.co.ke. The website shows daily figures of how the companies are trading.
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