10 August 2017

Kenya: Political Tension Subdues Trading at Nairobi Bourse

Trading at the Nairobi bourse on Wednesday plummeted to rock bottom as tension gripped the country in the wake of a contested outcome of Tuesday's election, bringing economic activity across all sectors to a standstill.

Turnover slumped to Sh166.6 million as investors largely kept away from the market hoping for a speedy resolution of the election impasse, cutting trading volumes to a bare minimum.

Dealers said few clients were in the market looking to buy or sell shares, with most preferring to observe events from the safety of their homes.

Most cities, including Nairobi, Mombasa, Kisumu and Nakuru, were mostly deserted although the government had only declared Tuesday a public holiday.

"Market turnover has been subdued as most market participants stayed out. We expect today's trading session to be slow as well as we wait for the election results," said Genghis Capital in a trading update. A spot-check across several stockbroker premises revealed largely empty banking halls, a situation reminiscent of what transpired a decade ago when post-election turmoil cut trading activity sharply.

Market data showed only 7.8 million shares were traded across all 62 counters, compared to 10.4 million on Monday and 29.3 million last Friday. Turnover had stood at Sh302 million on Monday, down from Sh848 million on Friday.

The number of deals also fell to 638, from 1,097 on Monday.

The NSE traded an average turnover of Sh1 billion per day in July, indicating just how much the political tension has spooked investors, prompting them to hold on as they wait to see what direction the country will take.

On Wednesday, the stocks that traded largely recorded price gains, with the optimism indicating that the negative effect of the polls on the market is unlikely to persist once the there is a conclusive end to the impasse.

The stock market has been on the upward trajectory since March, pushing the main NSE 20 share index to trade at one-year high of 3850 points.

Telecoms operator Safaricom #ticker:SCOM dominated Wednesday's trading, accounting for 32 per cent of turnover having moved 2.21 million shares at Sh23.75, which was 25 cents higher than Monday's Sh23.50.

The secondary bonds market was also slow, the turnover having halved to just Sh306 million from Sh684 million on Monday.

A quick resolution of the election row that is now seen as key to restoring investor confidence in the financial markets was complicated after the opposition Nasa coalition claimed that the IEBC database had been compromised and the tallying of results manipulated -- putting the country deeper into the waiting mood that may persist for the rest of the week.

Currency trading was also slow even as the shilling initially strengthened against the dollar to an average of 103.80 units to the greenback, from Monday's average of 104 units. It later on eased to 103.85 units to the dollar.

The CBK indicative rate stood at an average of 103.90, slightly weaker than Monday's 103.88 average. "The shilling remains under pressure but we expect it to remain range-bound today as most buyers take a wait-and-see approach," Genghis said.

The IEBC's discredited provisional results indicated that President Uhuru Kenyatta was leading the race for the top job with 54.4 per cent of the valid votes cast against former Prime Minister Raila Odinga's 44.4 per cent.

Analysts said that in addition to the immediate resumption of normal trading, investors are also keeping an eye on the possibility of seeing key policy changes, such as a revision of the bank interest rate cap which has caused upheaval in the banking sector.

"Next, from a financial markets perspective, focus will shift to whether President Kenyatta's coalition has established a sufficient majority in Parliament... to repeal the interest rate cap law," said Hasnain Malik, an analyst at Exotix Capital.

Kenya

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