NAIROBI, July 11 (Xinhua) -- Kenya plans to leverage on the newly launched derivatives market to lure more foreign investors into the capital markets, an official said on Thursday.
Geoffrey Odundo, CEO of Nairobi Securities Exchnage (NSE), told journalists in Nairobi that the derivatives market offers sophisticated financial instruments that can widen the scope of capital market products available in the country.
"We anticipate the newly launched NEXT derivatives market will pull more foreign investors into the capital markets because it will enhance investors' portfolio performance by availing risk management tools in the wake of increasing asset price volatility," Odundo said.
A derivatives market involves the trading of financial instruments like futures contracts, stocks, indices, commodities, currencies, exchange rates, or the rate of interest.
Kenya's NSE is the second African exchange to launch a derivatives market.
The launch follows a successful six-month pilot phase conducted to test the functionality of end-to-end transactions of futures contracts in a live environment, Odundo said.
With the derivatives market, the capital market will enhance its liquidity as investors will be able to make profit whether the markets are down or up, he said.
Kenya is keen to enhance its position as Africa's regional financial hub that can serve the rapidly expanding African economies, Odundo said.
The national development blueprint, Vision 2030, also recognizes the role of a vibrant financial sector in mobilizing both foreign and domestic resources to fund economic development, he noted.
The NSE will now offer index futures and single stock futures on selected indices and stocks, Odundo said said.