What is the NSE?
The Nairobi Securities Exchange (NSE) is Kenya’s stock market where companies list their shares for public trading. It’s where Kenyans can buy ownership in companies like Safaricom, Equity Bank, KCB, EABL, and many others.
Think of it as: A marketplace, but instead of buying vegetables, you’re buying and selling pieces of companies.
How the NSE Works
Listing
Companies list shares on NSE to raise money:
- Company decides to “go public”
- Offers shares to the public (Initial Public Offering - IPO)
- Money raised helps company expand
- Shares then trade on NSE
Example: When Safaricom listed in 2008, they sold shares at KES 5 each. Now worth much more.
Trading
Buying and selling happens through stockbrokers:
- You don’t buy directly from NSE
- You need a broker (like Genghis, Faida, AIB-AXYS)
- Broker executes your buy/sell orders
- Trades happen Monday-Friday, 9am-3pm
Ownership
When you buy shares:
- You own part of that company
- You’re a shareholder
- You can attend Annual General Meetings (AGMs)
- You may receive dividends
NSE Market Segments
Main Investment Market Segment (MIMS)
Large, established companies
Examples: Safaricom, Equity Bank, EABL, BAT Kenya
Requirements to list:
- Minimum 3 years of profitable operations
- Strong financial position
- Good corporate governance
For investors: Most stable, well-known companies
Alternative Investment Market Segment (AIMS)
Smaller, growth-stage companies
Examples: Acorn REIT, Home Afrika
Requirements: Less stringent than MIMS
For investors: Higher risk but potential for faster growth
Growth Enterprise Market Segment (GEMS)
Small and medium enterprises (SMEs)
Purpose: Help SMEs raise capital
For investors: Highest risk, smallest companies, least liquid
Fixed Income Securities Market Segment (FISMS)
Bonds traded here:
- Corporate bonds
- Treasury bonds
- Infrastructure bonds
For investors: Alternative to stocks, usually lower risk
Key NSE Indices
NSE 20 Share Index
What it is: Tracks 20 largest companies by market capitalization
Purpose: Shows overall market performance
Example: “NSE 20 is up 5% this year” means top companies gained value
NSE 25 Share Index
What it is: Tracks 25 companies
Purpose: Broader view than NSE 20
NSE All Share Index (NASI)
What it is: Tracks all listed companies
Purpose: Most comprehensive market performance indicator
Use: Best gauge of overall market health
Why Indices Matter
- Benchmark: Compare your portfolio performance to market
- Market mood: Rising index = bullish market, falling = bearish
- Investment funds: Many funds aim to match or beat these indices
Major Companies on NSE
Banking Sector
- Equity Bank (EQTY): Largest bank by customer base, strong in East Africa
- KCB Group (KCB): Large bank, regional presence
- Co-operative Bank (COOP): Popular with SACCOs and cooperatives
- ABSA Bank Kenya (ABSA): Formerly Barclays
- Stanbic Bank (SBK): Part of Standard Bank Group
Telecommunications
- Safaricom (SCOM): Largest company on NSE, M-Pesa, mobile services
- Airtel Networks Kenya: Recently listed
Manufacturing & Consumer Goods
- East African Breweries Limited (EABL): Tusker, Senator, Guinness
- BAT Kenya (BAT): British American Tobacco
- Unga Group (UNGA): Flour, animal feeds
- Kenya Orchards (KO): Del Monte products
- Kakuzi (KAKUZI): Tea, macadamia, avocados
Insurance
- Jubilee Holdings (JBIC): Major insurance and investment company
- Britam (BRIT): Insurance, asset management
- CIC Insurance (CIC): Insurance and investment
Energy & Infrastructure
- Kenya Power (KPLC): Electricity distribution
- KenGen (KGEN): Electricity generation
- Total Energies (TOTL): Fuel, lubricants
- Vivo Energy (VIVO): Shell branded fuels
Real Estate & Construction
- Bamburi Cement (BMBC): Cement manufacturing
- East African Cables (EACL): Cables, conductors
- Acorn I-REIT: Real estate investment trust (student housing)
Other Key Sectors
- Agriculture: Sasini, Kapchorua Tea, Williamson Tea
- Automobiles: Car & General, Sameer Africa
- Commercial Services: Nation Media Group, Standard Group, Deacons East Africa
Understanding Stock Prices
Market Capitalization (Market Cap)
What it means: Total value of a company
Calculation: Share price × Total number of shares
Example:
- Safaricom has 40 billion shares
- Share price is KES 20
- Market cap = 40 billion × 20 = KES 800 billion
Categories:
- Large cap: Over KES 10 billion (more stable)
- Mid cap: KES 1-10 billion
- Small cap: Under KES 1 billion (more volatile)
Price-to-Earnings Ratio (P/E Ratio)
What it means: How much you pay for each shilling of company profit
Calculation: Share price ÷ Earnings per share
Example:
- Share costs KES 100
- Company earns KES 10 per share
- P/E = 100 ÷ 10 = 10
Interpretation:
- Low P/E (under 10): Stock might be undervalued (or company struggling)
- High P/E (over 20): Stock might be overvalued (or high growth expected)
- Compare within industry: Banks vs banks, telecoms vs telecoms
Dividend Yield
What it means: Annual dividend as percentage of share price
Calculation: (Annual dividend per share ÷ Share price) × 100
Example:
- Share costs KES 100
- Annual dividend KES 5
- Yield = (5 ÷ 100) × 100 = 5%
Use: Compare to other investments (bonds, money market funds)
Book Value
What it means: Company’s net assets per share
Calculation: (Total assets - Total liabilities) ÷ Number of shares
Use: If market price < book value, stock might be undervalued
How Prices Move
Supply and Demand
More buyers than sellers → Price goes up
More sellers than buyers → Price goes down
Example: Safaricom announces record profits → Many want to buy → Price rises
Company Performance
Good news = Price up:
- Increased profits
- New contracts
- Expansion
- Good products launched
Bad news = Price down:
- Losses
- Scandals
- Regulations
- Economic downturn
Economic Factors
Things that affect all stocks:
- Interest rates (high rates = stocks less attractive)
- Inflation
- Currency exchange rates
- GDP growth
- Political stability
Sector Trends
Industry-specific factors:
- Banking: Central Bank policy, loan defaults
- Agriculture: Weather, global commodity prices
- Energy: Oil prices, regulations
- Telecoms: Subscriber growth, data usage
Market Sentiment
Psychology:
- Bull market: Optimistic, prices rising
- Bear market: Pessimistic, prices falling
- Sometimes prices disconnect from fundamentals (bubbles or panic)
Types of Stock Returns
Capital Gains
What it is: Profit from selling shares at higher price than you bought
Example:
- Buy 100 shares at KES 50 = KES 5,000
- Sell 100 shares at KES 70 = KES 7,000
- Capital gain = KES 2,000 (40% return)
Tax: Capital gains tax may apply (check current rates)
Dividends
What it is: Company shares profits with shareholders
Types:
- Cash dividend: Money paid to your account
- Bonus shares: Free additional shares
Example:
- You own 1,000 shares
- Company declares KES 2 dividend per share
- You receive KES 2,000
Frequency: Usually once or twice per year, after AGM
Tax: Withholding tax usually deducted (currently 5%)
Total Return
What it matters: Capital gains + Dividends = Total return
Example over one year:
- Bought at KES 50, now KES 60 = KES 10 capital gain per share
- Received KES 3 dividend
- Total return = KES 13 per share (26% return)
Market Risks
Market Risk
What it is: Overall market goes down, your stocks too
Example: COVID-19 crash in 2020—almost all stocks fell
Protection: Diversify across asset types (stocks, bonds, cash)
Company-Specific Risk
What it is: Something bad happens to one company
Example: Kenya Airways struggles, stock falls, but other airlines okay
Protection: Diversify across multiple companies and sectors
Liquidity Risk
What it is: Can’t sell shares quickly at fair price
Example: Small company stock—few buyers, price drops significantly when you try to sell
Protection: Focus on large-cap, actively traded stocks
Regulatory Risk
What it is: Government changes rules affecting companies
Example: Betting firms—government raises taxes, profits drop, stock prices fall
Protection: Stay informed, diversify
NSE vs Other Investments
NSE Stocks vs Bonds
Stocks:
- Higher risk, higher potential return
- Ownership in company
- Price fluctuates daily
- Dividends not guaranteed
Bonds:
- Lower risk, lower return
- Loan to company/government
- Fixed interest payments
- More predictable
NSE vs Money Market Funds
Stocks:
- Long-term investment
- Can lose value
- Potential for 15-20% annual returns
- Requires research and monitoring
Money Market Funds:
- Short-term, stable
- Rarely loses value
- 10-14% annual returns
- Minimal monitoring needed
NSE vs Real Estate
Stocks:
- Low entry cost (KES 5,000+)
- Easy to buy/sell
- Liquid
- Transparent pricing
Real Estate:
- High entry cost (KES 500,000+)
- Slow to buy/sell
- Illiquid
- Pricing less transparent
Who Should Invest in NSE?
Good Fit If You:
- Have long-term horizon (5+ years)
- Can tolerate losses (value might drop short-term)
- Have emergency fund (6 months expenses)
- Cleared high-interest debt
- Want to own real businesses
- Willing to learn and research
- Won’t panic when prices fall
Not Right Now If You:
- Need money within 1-2 years
- Can’t afford to lose
- No emergency savings
- Heavy debt
- Easily stressed by volatility
- No time to learn basics
Common Myths
Myth 1: “Stock market is gambling”
Reality: With research, it’s calculated risk. Companies have real value, products, profits.
Myth 2: “You need lots of money to start”
Reality: Can start with KES 5,000-10,000. Buy a few shares, add over time.
Myth 3: “You must trade daily to make money”
Reality: Best investors buy and hold quality companies long-term.
Myth 4: “Insider trading is how people win”
Reality: Illegal and rare. Most successful investors use public information and patience.
Myth 5: “Market crash means avoid stocks”
Reality: Crashes are buying opportunities. Markets always recover long-term.
Myth 6: “Diversification means many Kenyan stocks”
Reality: True diversification includes other countries, assets (bonds, real estate), not just more NSE stocks.
Getting Started Checklist
Before investing in NSE:
✅ Emergency fund in place (3-6 months expenses) ✅ High-interest debt cleared ✅ Understand basic concepts (this article!) ✅ Have long-term investment horizon (5+ years) ✅ Selected a broker (see next article) ✅ Opened CDSC account (see guide) ✅ Decided: lump sum or regular investing? ✅ Chosen 2-3 companies to research first ✅ Checked company financial statements ✅ Ready to invest and hold (not panic sell)
Resources
Official NSE Resources
- Website: nse.co.ke
- Listed companies: Company profiles, financials
- Market data: Daily prices, volumes
- Announcements: Company news, dividends
Research Tools
- Company annual reports: On NSE website or company websites
- Business news: Business Daily, The Star, Standard
- Broker research: Many brokers publish reports
Regulation
- Capital Markets Authority (CMA): cma.or.ke
- Verify licensed brokers
- Report fraud
- Investor education
Next Steps
- Read next article: “How to Buy Shares on the NSE”
- Study 2-3 companies: Start with familiar ones (Safaricom, Equity, EABL)
- Open CDSC account: Required to own shares
- Choose a broker: Compare fees and services
- Start small: Buy your first shares (even just 10-20)
- Learn as you go: Experience teaches more than theory
Remember: The NSE is not a get-rich-quick scheme. It’s a place where patient, disciplined investors build wealth over years by owning pieces of profitable companies. Start learning, start small, think long-term.