Financial markets have a way of expressing their ‘feelings’ about major events, such as the outcome of a general election.
Just like human beings, they react with ‘shock’ when they receive bad news and ‘rally’ with pleasure when they feel good about a particular occurrence.
It was not surprising, therefore, that the Nairobi Securities Exchange reacted with shock last Friday, when the Supreme Court annulled the results of the August 8 presidential election and sent President Uhuru Kenyatta and Raila Odinga back to the ballot.
Investors counted heavy losses in the few minutes following the ruling issued by Chief Justice David Maraga, the President of the Supreme Court.
The securities market crashed and had to be shut down temporarily, reversing the gains it recorded when it rallied to a 14-month high after the Independent Electoral and Boundaries Commission declared President Kenyatta validly elected with 54 per cent of the votes cast against Mr Odinga’s 45 per cent.
The verdict caused uncertainty among key market players—particularly foreign investors, who control over two-thirds of the market trade. The shilling also depreciated against major international currencies, though the shock was much less pronounced.
The cloud that engulfed Kenya’s securities market has been seen in many markets.
When Donald Trump was elected president of the United States last November, financial markets across the US, Europe, Asia and Australia tumbled.
His election was reported to have caused fear among investors at home and abroad.
Of late, the global financial markets have also been closely watching the escalating tensions in the Korean peninsula caused by North Korea’s defiant missile tests.
The mood of the markets is subject to interpretation.
The massive dumping of shares following Friday’s ruling could mean that investors opted to catch out because they were uncertain about Kenya’s future.
They didn’t want to be caught flat-footed in an environment where business prospects were no longer predictable.
The investors could also be focused on the cost of a second election and its impact on the economy.
This situation is likely to prevail until there is a clear outcome—which will, essentially, depend on how IEBC conducts the rerun and the acceptance of the results.
The market response could also signal what investors feel about ‘Kenyattaism’ and ‘Odingaism’. The historical ideological differences between President Kenyatta and Mr Odinga are strong enough to swing markets.
While President Kenyatta is more of a capitalist who embraces free market enterprise, Mr Odinga is more of a social democrat who fights for social equity.
In his four years in State House, President Kenyatta has expanded the space for private sector growth through massive investment in infrastructure, supported by market-friendly policies and institutions.
His arch-rival Odinga’s policies can only be deduced from his public pronouncements and party manifesto, which give prominence to historical injustices (including land ownership), reducing regional disparities through devolution and such issues that are likely to resonate with poor people.
In his quest to win the hearts of the poor, Mr Odinga has ruffled feathers quite a few times by attacking investors, even though he is a big investor in his own right. He has claimed that trading at the NSE was fuelled by illicit money from drugs and money laundering. He also frequently attacked landlords, escalating conflicts over rents, especially in informal settlements.
During his campaign in June, he rattled ranchers in Laikipia and other parts of the Rift Valley when he declared that, if elected, he would “rationalise” the ranches. This was amid violent confrontations between the ranchers and pastoralists.
A peaceful October 27 election is necessary to restore stability in the markets. Hopefully, the outcome will strengthen the foundations of democracy, equity and economic prosperity.
Mr Warutere is a director of Mashariki Communications Ltd. [email protected]