January 16, 2018 / 9:37 AM / a year ago

UPDATE 1-Kenya allows short-selling of shares to boost liquidity

(Adds comment by bourse CEO)

NAIROBI, Jan 16 (Reuters) - Kenya has changed its market regulations to allow short-selling of shares by participants to boost liquidity on the bourse, market officials said on Tuesday.

Pension funds hold the bulk of shares and the lack of securities lending, borrowing and short-selling framework has curbed activity as the funds typically don’t trade their holdings frequently.

“Making the Kenyan capital markets highly vibrant and liquid is a key priority for the capital markets industry and the Securities Lending, Borrowing and Short-Selling Regulations are expected to facilitate this,” said Paul Muthaura, chief executive of regulator CMA.

The Nairobi Securities Exchange is a key entry point for foreign investors looking for exposure to the region’s fast-growing economies.

Geoffrey Odundo, chief executive of the bourse, said the move to allow short-selling will help the market increase its turnover ratio to 15 percent from 6 percent currently. “It is good for the market,” he said.

Turnover ratio refers to the percentage of holdings sold over the course of a year.

Short-selling involves the sale of a financial instrument that the seller does not own at the time of the transaction, having borrowed or rented them, before buying similar instruments later to repay the lender.

Reporting by Duncan Miriri; editing by Jason Neely

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