Investors book Sh56 billion paper loss in a day at NSE

 

Nairobi Securities Exchange trading floor. FILE PHOTO | NMG

By OTIATO GUGUYU
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Investors lost Sh56.7 billion of paper wealth at the Nairobi Securities Exchange yesterday, the biggest interday drop since March last year.

The market soured for investors holding Safaricom stocks to lose Sh56 billion as its share price declined to Sh38.5.

East African Breweries  shed Sh1.1 billion, Equity Bank  lost Sh943 million and Coop Bank  cut Sh880 million whereas KCB  shareholders gained Sh1.2 billion.

Standard Investment Bank’s Executive Director for Research Eric Musau said the Safaricom dip was mainly driven by market forces after supply built up when the stock rose to Sh40 at the beginning of the year.

Equity Bank, he said, had also done well after announcing the International Finance Corporation deal of acquiring 253.1 million Britam shares at the lender.

“There has been a demand for Safaricom as it started rallying towards Sh40 then we started getting supply build-up from people who are willing to sell at that price, which pulls back the share price,” Mr Musau said.

Kenya’s hotly contested elections and associated political rhetoric affect investor confidence and prospects of listed companies.The Nairobi bourse has been making uneasy gains this year rising to Sh2.61 trillion at the close of trading Monday but has remained volatile even as the country enters a period of heightened political contest.

Foreign investors tend to be risk-averse during election period and exit, leading to huge capital outflows.

In 2017, Kenya’s stock exchange halted trading briefly after blue chip shares plummeted when the Supreme Court annulled the results of the August 8 presidential election.

Investors also shun the equities market during the election year, anticipating a dip in economic activity and business disruptions due to a history of disputed polls.

Kenya’s economy has a history of slowing down during election years when firms put investment decisions on hold, pending a return to normalcy.

Economic growth, for example, slowed to 4.81 percent in 2017 as a result of the bitterly-contested presidential poll from 5.88 percent a year earlier.

The same trend was seen in 2008 in the aftermath of the December 2007 presidential election and related violence that sank the economy to a growth of 0.23 percent from 6.865 percent a year before.

The notable exception was in 2013 when economy grew 5.8 percent after the Supreme Court amicably resolved a presidential dispute compared with 4.56 percent the year before.

Mr Musau said politics may not play a big role in determining the NSE trends this year as the economy is expected to remain resilient as companies emerge stronger from the struggles of Covid-19 pandemic.

“This year politics may not weigh in a lot. What we have seen is that the companies that survived through Covid have really strengthened and cut costs and we are beginning to see positive indications like higher employment figures, higher tax collections, signaling growth,” he said.

This year, Kenya’s GDP is expected to grow six percent, according to the Central Bank of Kenya up from an earlier projection of 5.6 percent.

Kenya’s economy has been resilient despite the Covid-19 pandemic contracting 0.31 percent in 2020 on the back of Covid-related partial trade shutdowns and travel restrictions.

The economy grew 9.9 percent in the third quarter of last year compared with a contraction of 2.1 percent in similar period in 2020 following the easing Covid-19 curbs.