Nairobi Securities Exchange could see higher trading volumes this year and its indexes, which fell sharply last year, could regain ground as advanced economies start to cut interest rates, its chief executive told Reuters.

The exchange's all-share and benchmark indices dropped by 27.74% and 10.44% respectively last year, as the Kenyan shilling weakened by more than 20% and the central bank raised interest rates in response.

Foreign investor activity at the Nairobi bourse, which is the sixth biggest in Africa and is seen as a gateway for exposure to fast-growing frontier economies in the region, has fallen by 15 percentage points since the start of 2023.

Daily traded volumes of shares slumped over the past year to less than $1 million, from the traditional average of $5-10 million.

Chief executive Geoffrey Odundo said he was hopeful the market could rebound as investors adjust to the prospect of lower interest rates in markets like the United States.

"They are keen to start hedging," Geoffrey Odundo said in an interview on Friday, referring to the practice of putting cash in a market that is likely to offer an upside.

He said the recent bear run on the market means that shares are looking attractively priced, with the average price-to-earnings trading multiples now at six, down from a past average of 10.

Even so, he acknowledged that continuing uncertainty about the shilling was weighing on investors.

"It is still the snowballing effects of "where is the currency going to settle? Where are the interest rates going to settle?" he said.

 

(Reporting by Duncan Miriri; Editing by Aaron Ross and Jane Merriman)