By Duncan Miriri
NAIROBI, Aug 5 (Reuters) – Kenya’s Nairobi Securities Exchange is creating East Africa’s first AI stocks-focused exchange-traded fund, which it plans to offer to investors before year-end, its CEO said.
The Nairobi market attracts a sizeable proportion of foreign equity investors given its profitable banking sector and telecoms operator Safaricom, but it does not currently offer exposure to AI stocks.
“We want essentially to be able to bring a product to our market where the underlying basket is a reflection of companies that have a direct exposure to AI,” Frank Mwiti told Reuters.
Companies like Microsoft, Anthropic and OpenAI could be used as references for the ETF, he added.
Kenyan investors can already access AI-related products abroad, but the NSE wants to make it easier for them to trade locally, Mwiti said, adding there was demand for an AI product especially from new, younger investors.
“Instead of cement manufacturing… they want to do AI,” he said.
EXCHANGE ALERT TO RISK OF BUBBLE, CEO SAYS
The AI boom this year has driven stock markets to record highs, but the surge has stoked concerns about a bubble that could drag world stocks down sharply if it pops.
The Nairobi bourse will study the global AI rally carefully and delay the ETF launch if need be to ensure investors are not exposed to an overdone move, Mwiti said.
“There is… a vibe in the market that there might be a bubble around AI, so maybe there is also an aspect of waiting and seeing,” he said.
ETFs are funds with underlying assets like listed shares, which trade on exchanges like ordinary equities, offering investors exposure to a particular asset class.
The planned AI fund will most likely be denominated in the Kenyan shilling, Mwiti said, to limit foreign exchange risks.
“Kenyans are actually investing in foreign markets because of lack of product diversity here,” he said.
The exchange is discussing the proposal with the market regulator, Mwiti said.
It is also considering a cryptocurrency ETF based on Bitcoin, Ethereum and Solana, which could be launched next year after the passage of a law governing virtual assets in Kenya, he said.
AI ETFS WIDELY AVAILABLE IN ADVANCED MARKETS
Many African capital markets do not yet have AI ETFs, which are available in big developed markets such as the United States.
Demand for such a product in Kenya is not just due to booming demand for shares in the likes of SK Hynix or Samsung, but also to the country’s increasingly investment-savvy young population, Mwiti said.
Safaricom started offering stocks trading on its M-Pesa mobile phone payments platform in February. That alone, Mwiti said, had helped secure a million new investors, many dipping their toes into the market for the first time.
Kenya’s equity market has rallied just over 30% so far this year..
Mwiti attributed that to strong company earnings and stable inflation and currency markets, which have combined to push the value of the stock market’s equities segment to a record 4 trillion shillings ($30.95 billion).
“My projection is we close the year at 5 trillion (shillings),” Mwiti said.
($1 = 129.2500 Kenyan shillings)
(Reporting by Duncan Miriri; Editing by Marc Jones, Dhara Ranasinghe and Jan Harvey)
