Subdued trading at NSE after the vote

Trading at the Nairobi Stock Exchange on Monday dropped to record levels as investors continued to shy away from the market following the referendum.

The benchmark NSE-20 share index—which tracks the performance of blue chip firms—closed trading 7.95 points down to 4,666 points on reduced demand, notably from foreign investors.

The thin trading signals that investors are still uncertain of the direction of the bourse after the vote even as stockbrokers termed the lull “ temporary.”

The number of shares traded dropped to 15 million from 25 million on Friday and 51 million on Tuesday ahead of the Wednesday vote.

The daily turnover stood at Sh252 million compared to Sh499 million on Thursday and Sh765.8 million on Tuesday—leaving stockbrokers with reduced commissions as investors stayed away.

“What we are seeing is short term volatility,” said Victor Odendo, an analyst at Apex Africa Investment Bank.

“In the long term, there is optimism that the market will pick up gradually on the back of increased investor confidence as the country reaps from a low political risk profile,” he added.

The bourse was witnessing reduced activities from foreign investors, a trend that started in May on uncertainty over the outcome of the referendum, he said.

The vote passed the new charter without reports of violence like that which followed elections in 2008.

In the currency market, the Kenyan shilling continued to gain against the dollar on Monday with dealers saying they were expecting further appreciation in the coming days, although they warned on some consolidation.

Commercial banks traded the shilling at 79.30/40 per dollar from 79.45/55 at Friday’s close.

The shilling crossed over the key 80.00 level against the shilling and stocks at the NSE index closed a new high for 2010 on Thursday, despite thin trading.

“We’ll likely consolidate a bit but the bias is for a stronger shilling, boosted by positive political risk and a positive economic outlook globally,” Mr Moses Kiboi, the head of trading at Citi Bank told Reuters in an interview.

On the NSE, Stock brokers are betting on the peaceful adoption of the new Constitution to help boost foreign investor and institutional participation, feeding the market with demand to lift the sluggish trading.

“As a frontier market, Africa always presents a higher risk investment destination. The peaceful adoption of the new Constitution is however injecting confidence back into the Kenyan stock market,” said Jan van der Does de Willebois, the head of equities at Dyer and Blair Investment Bank.