Stock Traders Scarce in Kenya as Poll Crisis Clouds Outlook

NAIROBI (Capital Markets in Africa) – Traders are deserting Kenya’s stock market, a star performer earlier this year, as the unresolved crisis around the country’s presidential election discourages foreign investors.

Volumes traded on the Nairobi stock exchange have slumped to the lowest this year, dropping to less than 46 million shares in the week ended Oct. 6 from as high as 285 million in June. Values have also dropped, with $870,000 of shares traded Thursday, 76 percent down from the $3.6 million that changed hands on Aug. 31, before judges ordered a rerun of the vote.

“The equity market is currently a rabbit trapped in the political headlights,” Aly Khan Satchu, chief executive officer of Nairobi-based Rich Management, said in an emailed response to questions.

Kenya’s benchmark index, which gained 26 percent in the 12 months to Aug. 31, has slumped to become the worst-performer in Africa and the second-biggest decliner globally since the Supreme Court ordered Sept. 1 that a new vote be held within 60 days, the first time an African presidential election has been overturned by a court. The stocks have dropped 6 percent since the ruling in local currency terms, the most of any benchmark in Africa, and the 6th worst globally.

All three Kenyan equity indexes fell in September, the first month that’s happened since March, said Francis Mwangi, head of research at Standard Investment Bank Ltd. in Nairobi.

Many foreign investors are steering clear of the market as they await “the resolution around our fragile and unfolding political situation,” Alistair Gould, CEO of Nairobi-based African Alliance, said by phone.

Foreign investors have been net sellers in 2017, for the first time since at least 2011, according to data from the capital markets regulator. Outflows in September rose to 5.8 billion shillings ($56 million), the highest since the regulator started keeping records.

Foreign outflows of 11.1 billion shillings in the third quarter were “largely as a result of heightened political uncertainty,” said Luke Ombara, director of regulatory policy and strategy at the Capital Markets Authority. The flows are expected to rebound, “as long as the current situation does not become protracted,” he said.

Source: Bloomberg Business News