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By Duncan MiririNairobi — Kenya’s Nairobi Securities Exchange (NSE) is creating East Africa’s first exchange traded fund (ETF) focused on AI stocks, which it plans to offer to investors before year-end, its CEO said.The Nairobi market attracts a sizeable proportion of foreign investors given its profitable banking sector and telecoms operator Safaricom, but it doesn’t offer exposure to AI stocks at present.“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 said.Companies such as Microsoft, Anthropic and OpenAI could be used as references for the ETF, he added.The exchange is discussing the proposal with the market regulator, Mwiti said.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 is demand for an AI product, especially from new, younger investors.“Instead of cement manufacturing ... they want to do AI,” Mwiti said.Careful studyThe 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 should it pop.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 such as listed shares, which trade on exchanges like ordinary equities, offering investors exposure to a particular asset class.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.— Frank MwitiThe planned AI fund will most likely be denominated in the Kenyan shilling to limit foreign exchange risks, Mwiti said.“Kenyans are actually investing in foreign markets because of a lack of product diversity here,” he 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.Savvy investorsMany African capital markets do not yet have AI-focused ETFs, which are available in developed markets such as the US. 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 (about $31bn).“My projection is we will close the year at 5-trillion [shillings],” Mwiti said.
