Bearish run at NSE persists as investors shy away

The Nairobi Stock Exchange experienced continued reduced activity for the third day as investors shied away from the capital markets.

The benchmark NSE-20 share index, which tracks the performance of blue chip firms, closed trading 72.71 points down at 4554.24 points on reduced demand from mainly foreign investors.

Analysts say the slow trading shows that investors are still uncertain of effects of the August 4 referendum on the market, adding that the lull is “temporary.”

“The bourse is witnessing reduced activity because investors are keeping an eye on the upcoming infrastructure bond issue,” said Mr Johnson Nderi of Suntra Investment Bank.

The number of shares traded increased to 27.65 million from 25.95 million on Tuesday, but the volume was lower than the 51 million traded last Tuesday before the vote.

Daily turnover stood at Sh397 million compared to Sh455 million the previous day, a drop from last Tuesday’s Sh765.8 million, putting a dent in the pockets of stockbrokers who have reported increased returns over the months due to renewed interest to the bourse.

Mr Nderi said investors are likely holding back awaiting the infrastructure bond that opened trade on August 6 and to close on August 24.

The government is seeking to raise Sh31.6 billion from the issue, with most of the funds expected to be directed to the development of geothermal power generation.

Stocks of blue-chip companies dropped in Wednesday's trading.

Among the stocks that declined are Barclays Bank that lost Sh2 to close at Sh66, Athi River Mining lost Sh7 to close the day at Sh156 and Standard Chartered Bank that lost Sh20 to close the day at Sh271 a share.

Stockbrokers are betting on the peaceful adoption of the new Constitution to lure foreign and institutional investors back to the bourse to help lift the sluggish trading.

Mr James Wangunyu, the managing director of Standard Investment Bank, said foreign investors participation had also slumped owing to the thin returns from the secondary bond market.

“Foreign investors are leaving because the returns from bonds are not attractive any longer,” said Mr Wangunyu.

Africa has been a high risk investment destination, but the peaceful adoption of Kenya’s Constitution is set to boost foreigners’ confidence.

The share of foreign investors’ participation has declined from 72 per cent in January to 24 per cent last month, according to NSE data.