Investors Diary
Dear Investor,
Welcome to sample a collection of my thoughts, research, financial advice, gut feeling and other works that i love to share with you from time to time.
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More latters as we strive the world of investing fun , more fun and alot of fun.
SMEs
Small and Medium Enterprises play a vital role in any emerging economy. In Kenya the emergence of microfinance banking has catapulted the growth of SMEs.
East African Exchanges
NSE, DSE and USE collectively the East AfricanExchanges have plans to allow the listing of SMEs through relaxation of the stringent listing requirements that characterise these marts. The tough floatation rules have hindered most SMEs from floation their shares through IPOs.
SME Listings
The listing of small and medium-sized enterprises (SME) is expected to provide more shares at the market, allowing investors to diversify their investments and help spread liquidity, which has at times distorted the valuation of some shares.The development, which will also be replicated by Kampala and Dar-es-Salaam bourses, will catapult the region into the same level with developed and middle level economies which allow listing for SMEs as a way of enhancing their contribution to the economic growth.
Regional Bourses Agree
The opening up of the regional bourses to SMEs by late 2008 was agreed on by the Kenya, Uganda and Tanzania heads of stock exchanges at the East African Securities Exchange Association (EASEA) meeting held in Kampala on September 7. This will spur the trading in the yer to be established over the counter market at these stock exchanges.
Historically over-the-counter markets were established at the beginning of the 20th century and have grown by leaps and bounds to become important part of the current financial markets infrastructure. Kenya is however yet to fully appreciate and embrace this phenomenon that is likely to thrust capital markets trading a notch higher with increased listings and options for the investing public.
Over-the-counter (OTC) trading
This is to trade financial instruments such as stocks, bonds,commodities, or derivatives directly between two parties. It is the opposite of exchange trading which occurs on futurews exchanges or stock exchanges.An over-the-counter contract is a bilateral contract in which two parties agree on how a particular trade or agreement is to be settled in the future. For derivatives, these agreements are usually governed by an International Swaps and Derivatives Association agreement.An over-the-counter market is a financial market where products are traded over-the-counter.
Role of OTC
The over-the-counter market has taken on a huge dimension especially in the USA, because there it has given room for other often also high risk issuers to enter the market, something which would have been impossible for them on a bourse.
In general
The reason for which a stock is traded over-the-counter is usually because the company is small, making it unable to meet exchange listing requirements.
In Kenya this would ensure that many corporate entities that have often been shying away from listing at the bourse due to stringent listing requirements will have an opportunity to sell their shares for subscription by the public. This would enhance the number of options available to investors and eventually would enhance trade volumes, liquidity and widen the options available.
