Even as Kenya gets ready to vote in a fresh presidential
election this coming Thursday, the political uncertainty of the past two
months has scared away investors from the Nairobi Securities Exchange;
some have been disposing of huge chunks of their shares.
The
bourse’s third quarter report, prepared by the Capital Markets
Authority, shows that foreign investor participation in the market slid
below the 60 per cent mark, hitting a quarterly average of 53.96,
compared with 77.2 per cent average in the same quarter last year.
The
decline in foreign investor participation is evidenced by the
significant net equity outflows of $111 million recorded by the market
over the period, compared with the net inflows of $60.2 million recorded
in the same period a year ago.
According to CMA
director of regulatory policy and strategy Luke Ombara, uncertainty
surrounding the country’s election period was to blame for the outflows
as foreign investors sold shares worth $342 million and bought only $231
million’s worth over the same period.
“The Ksh11.1
billion ($111 billion) foreign equity outflow registered in the third
quarter, was largely a result of heightened political uncertainty in the
country,” Mr Ombara said, adding the equity flows are expected to
rebound soon, “as long as the current situation does not become
protracted.”
Outflows rose to a high of $58 million in
early September, following the Supreme Court’s annulment of the
presidential election of August 8.
“The volatile political scenario has stymied just about everyone
and that is evidenced in the lacklustre volumes seen at the exchange,”
said Aly Khan Satchu, CEO of Rich Management.
The
uncertainty in the market was also reflected by a jump in bond market
performance; turnover rose to $1.08 billion — the highest in three years
— as investors shifted to the bond markets that are normally deemed
less risky to invest in.
According to analysts, the
sustained poll uncertainty fuelled by the withdrawal of Raila Odinga —
the main opposition candidate — from the election and the resignation of
a commissioner of the Independent Electoral and Boundaries Commission
just a week to the repeat election, means East Africa’s largest economy
could continue hurting.
“The single biggest obstacle to
growth has been politics. The economy has slowed down and is growing at
its slowest pace in five years due to drought, a credit squeeze and the
political situation,” Mr Satchu told The EastAfrican.
“Going
forward, some of the factors that might contribute to a deceleration in
economic growth include the ongoing political uncertainty, slowdown in
credit growth to the private sector vulnerability to harsh weather,
fiscal slippage and business activity disruption because of the general
election and tourism disruption,” says the CMA in its report.
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