Business News
NSE rebound due to global recovery
Posted Friday, January 22 2010 at 19:06
NAIROBI, Friday
Kenyan stocks are gaining this year thanks to the emerging global recovery, and if the rally is sustained in the months ahead it could spur new listings, the CEO of the Nairobi Stock Exchange (NSE) said on Friday.
NSE’s main index of 20 shares, NSE-20 , has gained more than 400 points, or nearly 12 per cent, since the beginning of this year. It closed Thursday’s session at 3,628.53 points, while the market’s bonds segment has maintained last year’s momentum.
“On the equities side, all the indicators are going upwards, foreign investor participation is quite strong. Local institutional investors have come back to the market,” Mr Peter Mwangi told Reuters. “My own view is that 2010 will be a much better year than ‘09 both for equities and for bonds.”
He attributed the expectations on improving investor sentiments after global markets pared most of their financial crisis-induced losses in the course of last year. “There is an argument that you need to get in now because even this market will recover further. There is some upside and investors are positioning themselves to take advantage of that upside,” he said.
Like other stock markets around the world, the NSE suffered in the wake of the financial crisis in 2008. The crisis sent market capitalisation and volumes sharply down. The NSE-20 sank 35 per cent during that year. The index and capitalisation fared better in 2009, shedding 8 per cent and 3 per cent respectively, but traded volumes plunged by 46 per cent.
Mr Mwangi cited the price of the biggest company by market capitalisation and number of shares on the bourse, telecoms firm Safaricom , as another sign of improving fortunes. “Psychologically it is important for our investors,” he said, referring to the fact that Safaricom shares have risen above their offer price of Sh5.
He said the rally and an ongoing privatisation round of a host of government-owned enterprises could spur new listings after they dried up in the wake of the financial crisis and the subsequent downturn. “If the momentum is maintained and we have a strong market, then we will generate more IPOs. Nobody wants to come to the market during a bear run, but when it becomes bullish, then the incentive is there for companies to come,” he said.
“Market conditions have improved remarkably; if that tempo is maintained, by the time we are getting to the second quarter, it will be a good time for companies to come to the market.” He said the NSE was likely to launch trading services through mobile phones and over the internet this year, which would make it easier for investors to buy or sell shares.
“It is the investment banks and the brokers who will provide that service to their clients. It’s a good development for the market because it gives more control to the investor,” he said. Various measures aimed at addressing governance challenges which had hit the market in the last two years, eroding investor confidence, had been implemented, Mr Mwangi said. The measures include additional capitalisation for brokerages and investments banks as well as regular publication of trading results.
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