The Nairobi Stock Exchange (NSE) is a top African exchange for stocks and bonds based in Kenya. Local and international investors can trade in the NSE.
But before we get further into trading on NSE, let’s make sure that we are all on the same page.
What are stocks and why should you trade stocks on NSE?
Well, stocks are collections of shares of a company where shares are units of capital of a company.
Bonds, on the other hand, are instruments of indebtedness of a company to bondholders.
Shareholders share in both profits and losses of the company once they purchase stocks in the NSE. On the brighter side, investors also stand to profit from share price changes.
Still, wondering how to trade the stocks of the many companies listed in the Nairobi Stock Exchange?
Well, continue reading to learn everything there is to know about stocks trading and how easily to apply the knowledge on the NSE.
Trading in the Nairobi Stock Exchange (NSE).
Whether a local or international investor, you both have equal chances of getting to trade in the Nairobi Stock Exchange.
Here is how goes.
Research and Education.
You need to grow your interest in stock trading before you put your money on the investment.
Simply put, you must first understand what you are getting into.
And what easier way is there t understand stock trading than to invest your time (and other times money) on learning the art of trading?
Carry out the necessary research and educate yourself adequately.
Learn about the asset market in general and everything that revolves around stock trading.
Do you intend to trade stocks the traditional way or online?
Did you know that either way; you need a broker to carry out any transactions at the Nairobi Stock Exchange?
Do you know you’ll also need good capital to trade stocks profitably?
Do you know just how much money is enough to trade successfully on NSE?
Plus your broker also charges you a varying commission on traded assets. You need to know if you can afford these commissions or not.
Choose a Reliable Stock Broker.
The Nairobi Stock Exchange does not deal with individual investors. It deals with them via recognized and listed brokers. You, therefore, need a stockbroker through which you will access the stock market and execute trades.
But then, you don’t just desperately go for any broker in town. There are requirements that a broker must meet to be declared fit for investing through.
Check against the checklist below:
- Must be licensed, regulated, and listed on the Nairobi Stock Exchange.
- Should charge affordable commissions.
- Must offer enough education and assistance as well as client support.
- Should be reputable and have been in operation for long enough.
- Must meet your trading preferences such as traditional or online trading.
Now that you know what requirements an ideal broker must meet, which are these brokers in Kenya that are licensed and regulated to deals for Kenyan investors?
- KCB Capital.
- Dyer &Blair.
- Equity Investment Bank Limited.
- NIC Securities.
- Barclays Financial Services Limited.
- Sterling Capital Limited.
- Faida Investment Bank Limited.
- Suntra Investment Bank.
- SBG Securities Limited.
- Kingdom Securities.
- AIB Capital.
- Genghis Capital.
Open a Stock Trading Account.
To trade any of the stocks listed in the Nairobi Securities Exchange through any listed broker, you must open a Central Depository System (CDS) Account.
You can open this account either as an individual or jointly as a group that intends to invest in the NSE stocks.
Where to Open a CDS Account to Start Trading on Nairobi Securities Exchange.
- A licensed Central Depository Agent (CDA) – your stock broker lies here. They need to be CDAs to open you a CDS account. Find out if they are.
- The Central Bank of Kenya (CBK) – you can also choose to open your CDS account through the CBK and it will work just fine.
But what are the requirements of opening a CDS account? They are as follows:
- Filled and signed a CDS 1 form.
- Filled CDS account specimen signature mandate card.
- Two colored passport size photos.
- Copy of your National Identity Card or Passport.
- Evidence of income such as a payslip or bank statement.
- Evidence of permanent physical address such as a utility bill or tenancy agreement.
Submit these documents to your broker if a CDA, or to the CBK if opening your account from there.
What you must note is that Ksh.1, 200 or its equivalent is required to open a CDS account.
You will also be charged Ksh.100 to keep your CDS account open.
You cannot trade stocks on a Ksh.0.00 balance, can you?
You must therefore fund that account with adequate money in order to be ready to trade stocks.
Here are things you must consider while funding your CDS account:
- The minimum number of shares you can purchase in NSE is 100 Shares.
- The amount you deposit depends on the cost per share of the company you intend to buy stocks from.
To simplify things, let us say that the company whose stocks you want to trade offers each share at Ksh.5. That means that the minimum you can fund your account with is Ksh.500 plus the account maintenance fees.
Put all those into consideration and determine how much you should deposit into your CDS account.
Pick the stocks to trade.
You don’t just trade any stocks. Here are things you must consider in choosing which stocks to trade:
- Size and market capitalization of the company.
- Company’s balance sheet.
- Firm’s history and future prospects and strategies.
- Company’s debt burden and the probability of dissolution.
- Company’s revenue and net worth.
If such, among many other business fundamentals, give you a green light, then proceed to buy the company’s shares. Remember to consider competing firms of the company and their fundamentals as well.
Trade-in Nairobi Stock Exchange.
Have you decided which stocks to buy?
Then access the Nairobi Stock Exchange and buy them. Remember, you can either do this traditionally through your broker or online via your broker platform.
It’s that simple!
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