Looming elections cast long shadow on NSE

By Jackson Okoth

KENYA: Investors are keenly watching the unfolding events on the political landscape ahead of the March polls. This is as the market prepares for a slow down in activity during the first quarter of this year, awaiting outcome of the polls.

Unlike last year when the market was bearish — with the benchmark NSE 20 share index leaping past the 4000-point level — political noise will interfere with this trend in the coming months.

When the markets opened yesterday, volumes remained light and lackadaisical, an indication of December holiday effects.

“The forthcoming elections will loom more sharply into view and probably cap the exchange’s headroom in the first quarter,” said Aly Khan Satchu, an independent financial analyst in Nairobi.

Most problematic

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The candidacy around the Jubilee Alliance of powerful and wealthy Deputy Premier Uhuru Kenyatta and his running mate William Ruto remains the most problematic for discerning investors.

The bourse is likely to react positively if a President and a Deputy who can work with the international community is elected into office. If not, the market’s indices could plunge.

According to a market review and Q1 outlook report by NIC securities, the market is likely to remain volatile in the first quarter as elections approach.

“Risks will be further aggravated by the potential of a run off if latest political realignments are anything to go by,” said the review.

One of the top Presidential candidates Deputy Premier Uhuru Kenyatta and his running mate William Ruto enjoy strong backing in two of the key provinces in Kenya. The two are facing charges of crimes against humanity at the International Criminal Court (ICC). Cautious trading by investors could see a significant shift in favour of safer havens including government bills and bonds.

 The bourse closed the year on December 31 on an upward trend, with the benchmark NSE 20 Share index gaining a total of 10.80 points to settle at 4,133.02. The All Share Index (NASI) gained 0.12 points to close the year at 94.86.

Stockbrokers anticipate a correction in prices due to both profit taking and cautionary trading ahead of the March General elections.

NIC review expects that risk aversion ahead of the March elections is set to occasion losses to the indices to about 3,900.0 points by midJanuary.