Activity at the Nairobi Securities Exchange almost ground to a
halt last week as uncertainty engulfed the country pending the
announcement of the presidential election result.
Market
analysts said the rebound of the market was hinged on a fair electoral
process and the delivery of justice to aggrieved parties.
The market was largely dominated by foreign investors as local investors adopted a wait-and-see attitude.
Kenya
went to the polls on August 8, but a hotly contested presidential race
pitting President Uhuru Kenyatta of Jubilee party and Raila Odinga of
the Nasa coalition threw the country into a state of uncertainty
especially after the opposition questioned the authenticity of the results that were being streamed by the electoral commission.
“Political
risk has brought the country to a near standstill, which should not be
the case. Going forward, the recovery of the market is dependent on the
acceptance of a fair electoral process and the deliverance of justice
for aggrieved parties,” said Daniel Kuyoh, a senior investment analyst
at Alpha Africa asset managers.
According to the
Capital Markets Authority, the investors’ precautionary actions to
shield their investments from political risks could lead to a slow-down
in economic activities.
“Economic growth has
consistently been lower during an election year. Investor sentiments
around political risk shall be a driver of the speed of any
post-election economic rebound or deceleration,” said the Capital
Markets Authority.
Shares volume
The
volume of shares traded on the Nairobi Securities Exchange declined by
85 per cent from 51.47 million shares in the week ended August 4 to 7.7
million shares by Wednesday last week. Market turnover fell 78 per
cent to Ksh166 million ($1.66 million) from Ksh768 million ($7.68
million).
The value of listed shares declined by two
per cent to Ksh2.26 trillion ($22.6 billion) from Ksh2.31 trillion
($23.1 billion) in the same period.
According to
Francis Mwangi, head of research at Standard Investment Bank, foreign
investors who constituted 72 per cent of market activities sold $350,000
worth of shares on Wednesday last week.
On an
average day, foreign investors sell between $600,000 and $1 million
worth of shares and buy $500,000 to $1.2 million worth of shares.
“Currently, activities is still very low in the market, but we expect a rebound when things are resolved,” said Mr Mwangi.
As at June, foreign investors accounted for 57.9 per cent of the total market turnover, compared with 76.9 per cent in March.
Prior
to the election, valuations at the stockmarket rebounded strongly
during quarter two (April-June) partly triggered by the generous
dividend payouts by most companies for the 2016 financial year.
The
corporate earnings outlook for this year is modest owing to the
slowdown in business activities and even as the Banking Amendment Act,
which introduced interest rate caps, is implemented.
It is projected that the energy, banking and agriculture sectors will report negative to low-digit growth numbers this year.
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