NSE gains Sh4bn more in second day after attack

Investors’ wealth at the stock market increased by nearly Sh4 billion in Thursday’s trading, marking the second straight day of gains since Tuesday's terrorist attack on the 14 Riverside offices and hotel complex.

The Nairobi Securities Exchange (NSE) #ticker:NSE gained Sh19 billion on Wednesday, raising the market valuation since the Tuesday attack to Sh23 billion.

The sustained gains are seen as a positive sign of investor confidence in the medium and long-term economic fundamentals of the country, which has in the past suffered wealth erosion after similar terror attacks.

Market capitalisation at close of trading Thursday stood at Sh2.171 trillion, up from Sh2.167 trillion on Wednesday, while the NSE 20 share Index rose by 5.6 points to close at 2,849.8.

The NSE All Share Index ended the day 0.25 points higher at 145.01, while the NSE 25 Share index was up 17 points to stand at 3640.19 on the back of bank stock gains.

Local investors have stepped up their demand for shares in the past two days, with some foreign investors taking advantage of the demand to book profits.

This has helped push up share prices of blue chip stocks that have a larger influence on the main indices.

“Foreign investors continue to be dominant in the market, but there is demand from both local and foreign investors, mainly on the index counters with lacking supply to match,” said Genghis Capital analysts in a note Thursday.

Departure from past incidents

The reaction of the stock market to this week’s terrorist incident marks a departure from similar incidents in the past, such as the 2013 Westgate Mall and the 2015 Garissa University attacks, both of which caused a downturn in the bourse and triggered a depreciation of the shilling.

Analysts Thursday said the positive sentiment was helped by the improved reaction by security forces to the incident compared to past attacks.

This demonstrated to investors that the country was learning from past mistakes.

Tuesday’s attack by Al-Shabaab had much lower fatalities at 21, according to official statements, and it took less than 24 hours before the terrorists were subdued by security forces.

In contrast, the Westgate attack which claimed 68 lives took days to resolve, leading to prolonged tension in the city which affected businesses and markets.

The relative calm in the past three years, which have seen limited terror attacks, is also serving as a reassurance to investors that the Tuesday incident was a one-off, rather than the start of a new wave of attacks.

On Thursday, the terrorist group said the attack was in retaliation to last year's decision by US President Donald Trump to recognise Jerusalem as the capital of Israel.

Stable exchange rate

Besides the gains at the NSE, positive sentiment also filtered through to the shilling, which for a third straight day was barely moved in its exchange rate to the dollar.

The shilling was trading at an average of 101.70 in the interbank market to the greenback by mid-afternoon, having opened the day at the same level.

Support came mainly from dollar inflows, led by remittances and agriculture export earnings, amid benign demand for dollars from corporates.

Unlike Wednesday, when the Central bank of Kenya had also weighed in by mopping up Sh14.5 billion in excess liquidity, the regulator kept out off yesterday, citing a balanced market.

Both the shilling and stocks are expected to keep up their trends today as the markets wind down for the weekend.