Activity at the Nairobi Securities Exchange almost ground to a halt last week as uncertainty engulfed the country pending the announcement of the presidential election result.
Market analysts said the rebound of the market was hinged on a fair electoral process and the delivery of justice to aggrieved parties.
The market was largely dominated by foreign investors as local investors adopted a wait-and-see attitude.
Kenya went to the polls on August 8, but a hotly contested presidential race pitting President Uhuru Kenyatta of Jubilee party and Raila Odinga of the Nasa coalition threw the country into a state of uncertainty especially after the opposition questioned the authenticity of the results that were being streamed by the electoral commission.
“Political risk has brought the country to a near standstill, which should not be the case. Going forward, the recovery of the market is dependent on the acceptance of a fair electoral process and the deliverance of justice for aggrieved parties,” said Daniel Kuyoh, a senior investment analyst at Alpha Africa asset managers.
According to the Capital Markets Authority, the investors’ precautionary actions to shield their investments from political risks could lead to a slow-down in economic activities.
“Economic growth has consistently been lower during an election year. Investor sentiments around political risk shall be a driver of the speed of any post-election economic rebound or deceleration,” said the Capital Markets Authority.
The volume of shares traded on the Nairobi Securities Exchange declined by 85 per cent from 51.47 million shares in the week ended August 4 to 7.7 million shares by Wednesday last week. Market turnover fell 78 per cent to Ksh166 million ($1.66 million) from Ksh768 million ($7.68 million).
The value of listed shares declined by two per cent to Ksh2.26 trillion ($22.6 billion) from Ksh2.31 trillion ($23.1 billion) in the same period.
According to Francis Mwangi, head of research at Standard Investment Bank, foreign investors who constituted 72 per cent of market activities sold $350,000 worth of shares on Wednesday last week.
On an average day, foreign investors sell between $600,000 and $1 million worth of shares and buy $500,000 to $1.2 million worth of shares.
“Currently, activities is still very low in the market, but we expect a rebound when things are resolved,” said Mr Mwangi.
As at June, foreign investors accounted for 57.9 per cent of the total market turnover, compared with 76.9 per cent in March.
Prior to the election, valuations at the stockmarket rebounded strongly during quarter two (April-June) partly triggered by the generous dividend payouts by most companies for the 2016 financial year.
The corporate earnings outlook for this year is modest owing to the slowdown in business activities and even as the Banking Amendment Act, which introduced interest rate caps, is implemented.
It is projected that the energy, banking and agriculture sectors will report negative to low-digit growth numbers this year.