NSE explains poor trends at stock markets
Mr Ochieng Oloo (left) chairman of Business Media Development Institute (BMDI) and the Nairobi Stock Exchange chief executive officer Chris Mwebesa follow a presentation during the media briefing on the state of the stock market on Monday. Photo/FREDRICK ONYANGO
What you need to know:
- Though reaction to crisis may differ, Kenya is part of the global economy
The effects of an integrated global economy, in which Kenya is part of, is to blame for the bearish performance of regional securities exchanges.
The financial turmoil that has gripped major world economies has also had a negative effect on regional bourses thus their poor performance over the last few months.
Consequently, performance of the Nairobi Stock Exchange has not been spared by the global economic meltdown that has hit other African and Asian nations as well.
Different responses
By the end of last month the NSE 20 share index had dropped by 40 per cent, a performance also witnessed in other regional securities.
However, according to Mr Chris Mwebesa, NSE chief executive, the pattern is quite unpredictable as the markets keep responding to global trends differently.
“We may have seen an improvement in the last couple of days of trading, but this is not a pointer that things are now well at the market. The trend is quite unpredictable,” said Mr Mwebesa.
Up to the end of last week, the NSE 20-share index had lost 1983.49 points. Despite a redefined zeal witnessed on Thursday and Friday, the market had declined to an overall of 3183.69 points.
The bearish market has created a slump across the counters sending stock prices low. Some counters sold below their offering price causing a panic sell among retail investors.
Apart from the Kenyan securities market, the Egyptian Exchange (Cairo and Alexandria Stock Exchange) lost 33 per cent on its 30-index.
Foreigners’ exit
The Nigerian Exchange dipped 23.22 per cent on its 30-share index and Johannesburg Stock Exchange of South Africa went down by 17.69 per cent on the JSE All Share Index.
Addressing a Business Media Development Institute (BMDI) luncheon in Nairobi yesterday, Mr Mwebesa also blamed the exit of foreign investors as another cause of the poor performance.
“This fall can partly be attributed to the withdrawal of foreign investors from the market to more safer investment such as government securities denominated in dollars,” explained Mr Mwebesa.
Foreign participation in the stock market has constituted about 20 per cent of the days’ activity. However, since June this had grown to about 55 per cent.
“Foreign participation has historically been of net inflows but the trend has changed to net outflows,” added the chief executive.
Meanwhile, the market opened the week on a positive note compared to the previous week.
The NSE-20 share index went up by 169.38 points to close at 3556.03 points. The NSE All Share index also went up by 3.40 points to close at 72.24 up from last week.
