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
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6 comments:
People are getting carried away by a Raila presidency. Kibaki may have succeeded in reviving our economy but he failed to deliver a new constitution and stamp out corruption.
If Raila does deliver the Bomas draft and also bring sweeping changes to the govt, then by all means his election will be a victory to all Kenyans.
JK, i don't think a Raila win will affect the market in anyway. It's common for investor to be worried when a general election is coming. But no matter who wins, i think the NSE will be on the rise soon after the elections. Governments are mere subjects of the market and they don't affect its perfomance to a large extend.
JK, peeps are ignoring the obviuos. Between Oct (when they confirmed NARC coalition) to Dec 2002, the NSE rose by 30%. Between Sept (when they confirmed Odm's lead) to Dec, we'll probably see the reverse or more especially if you include S'com.
ODM haven't talked about how they'll grow the economy only about re-distributing a very small cake. Who the hell eats a constitution?
And for those ignorant enough to say the economy growth hasn't been felt. It took China 30 years of 10%+ growth for them to get their GDP per capita to $2,000.
@mainat: I think economic growth lead to economic development which should have been felt by now. for five years the ecomony has been growing but on the ground i assure you nothing is changing but just prices of essential commodities going up.
And to correct you, the NSE went up by 30% between september and December 2002 because kenyan expected change for the better. It had nothing to do with which party will win the elections. Even if Sisi kwa sisi had won the index would have still gone up. I don't think kenyans got the change they wanted, thats why they want chage again, this time through ODM. Sorry, but thats the fact on the ground.
KaInvestor-i don't think you read my post. Re NSE-it went up in 2002, its going down in 2007 (with the 4,000 mark beckoning). And its not true that Sisi kwa Sisi would have done the trick because the NSE was depressed up until the euphoria of NARC tookover from Oct 2002. Happy to graph that for you.
On economic growth, I said that it took China 30 years (3-0 years) growing at 10% (that is double Kenya's current rate of growth rate) to get to its current $2,000 GDP per capita.
My prayer is that Kenyans won't in years to come, remember 200-7 as a golden period they way were doing the 70s.
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