Why share prices are falling at the NSE

The Ministry of Finance has cited lack of accountability by capital markets dealers as a major cause of the falling share prices at the Nairobi Stock Exchange.

Economic secretary Geoffrey Mwau said although Kenya has not felt the effects of the global financial crisis, lack of corporate governance in shares dealings poses a great risk.

So far, he said, local banks have not been affected by the credit crunch.

“Although investors are withdrawing from the Nairobi Stock Exchange, it has nothing to do with the global financial crisis but it is because of lack of corporate governance at the capital markets,” Dr Mwau told the Association of Retirement Benefits Schemes luncheon at Sarova Panafric Hotel in Nairobi on Thursday.

In less than two years, the Capital Markets Authority has placed three stockbrokers under statutory management for failing to follow regulatory mechanisms that protect investors’ interests.

In March 2008, the market regulator took over the management of Nyaga Stockbrokers, the second share dealer to fall into disgrace barely 11 months after Francis Thuo & Partners went under.

Dr Mwau was, however, optimistic that corporate governance reforms by CMA would create trust in the capital markets.