NSE share index drops below 4800 psychological mark

Money Markets

Investment brokers at the Nairobi Securities Exchange. PHOTO | FILE 

By JOHN GACHIRI

In Summary

• The NSE 20 share index breached the 4800 psychological barrier after declining 0.54 per cent on Wednesday from 4816.66 points.
• The Nairobi bourse has performed poorly against its frontier markets peers due to the weakening of the shilling against the dollar and outflows to the Egyptian and Nigerian markets.

The Nairobi Securities Exchange (NSE) 20 share index has continued on a downward trend since the beginning of the week closing at 4790.5 points on Wednesday.

The index breached the 4800 psychological barrier after declining 0.54 per cent on Wednesday from 4816.66 points.

Turnover however rose to stand at Sh1.3 billion from previous Sh773.9 billion while the number of shares traded increased to 34.3 million from 18.9 million over the same time.

The increase in activity was on account of foreign investors who were bullish on Equity, EABL and Safaricom shares. Standard Chartered’s share price closed at Sh265 that represented a 28-month low.

Kenya’s market has performed poorly against its frontier markets peers due to the weakening of the shilling against the dollar and outflows to the Egyptian and Nigerian markets.

“Most notable of the decliners was Kenya, a longtime frontier darling that is now eight per cent below its February peak and experiencing the first multi-month pullback in over four years.

“The driver for the pull-back looks to be almost entirely currency-driven; the shilling has weakened eight per cent since March and is rapidly closing in on Sh100 to the dollar,” said analysts at Citi.

READ: NSE 20-share index loses 5.5pc over capital gains tax dilemma

Citi however said the weakening of the shilling was not so bad since it would allow foreign investors to buy stocks at better prices.

The introduction of capital gains tax has also been cited as a cause for the reduced activity especially from foreign investors.

Some brokers however told the Business Daily that foreign investors are still buying and selling local stocks since there is still lack of clarity on how the newly reintroduced tax is to be implemented.

Brokers say that the five per cent tax on gains will make Kenya one of the few countries to impose the tax and will make Nairobi’s plan to be a financial hub more difficult.

Foreign investors accounted for 72 per cent of Wednesday trading