NSE AND RAILA

Sometimes, early this year, I blogged, on the effect of the coming general elections, on the NSE. A bloke has right to change his mind, because I have.

This week, Steadman, respected pollsters, have given Raila Odinga a commanding lead in the polls. Whereas I may have issues with the polls results but the emerging possibility that this man can actually run away with election is moving from the realms of imagination to reality

My concern is how the stock exchange has reacted to this polls. On Monday the NSE opened at an index of 5492 and a market capitalization of 830B KSH. By the time of writing this, Thursday has closed with the index being 5172 and a market capitalization of 797B Ksh. This means that investors at the stock exchange have been issued with a 33B KSh loss bill just by an impression of a Raila win created in them.

The reason for this crash is obvious to those who have been following Raila’s attitude to the bourse. For one he has termed the bourse as drug money cleaning forum and has said that he will reverse the IPO’s conducted by the current regime lately. These are not a confidence building statements and investors are voting with their feet, bolting before doom catches up.

Of course this is not the only effect to be experienced. Among others I expect foreign remittances to decline affecting the value of the Kenyan shilling leading to hikes in fuel bills, cost of essential imports etc.

As much as I had opined earlier that an ODM win or a Kibaki win would be the same eventually, Investors seem to have taken Raila’s threats a bit too seriously and it will take a lot of convincing to get this confidence back.

In the short term I advice a watch and see approach. If Raila win appears probable, so long as prices for your counters shall not have plummeted below cost, sell and dash off, but do not sell at a loss, if the prices will be below entry, hang on for a long haul as we watch the direction ODM takes us.

A kibaki win will ensure status quo maintenance and therefore prey on the stocks which shall provide an investing opportunity