Capital Markets

NSE gains Sh25bn after Supreme Court verdict

supreme

From left: Supreme Court judges Njoki Ndung’u, Smokin Wanjala, Deputy Chief Justice Philomena Mwilu, Chief Justice David Maraga, Jackton Ojwang and Isaac Lenaola when they delivered their ruling on the presidential poll petitions on November 20, 2017. photo | jeff angote

Trading at the Nairobi Securities Exchange #ticker:NSE took an upturn and the shilling gained slightly against the dollar hours after the Supreme Court upheld President Uhuru Kenyatta’s victory in the October 26 election, signalling that investors had positively reacted to the court’s decision.   

Total investor wealth rose by Sh25 billion — the highest single-day rise since May.

Share prices rose in the majority of counters at the bourse after the Supreme Court threw out petitions by civil society activists and former Kilome MP Harun Mwau.

Thirty-two out of the 62 actively traded stocks at the NSE gained value, leaving only seven in the red. Kenya’s 10-year Eurobond yields softened, signalling yet another calming of investor nerves.

Commercial banks quoted the shilling at 103.55/75 to the dollar by mid-afternoon against an opening range of 103.60/80. 

READ: Kenyan Shilling rallies against dollar after Supreme Court ruling

The benchmark NSE 20 share index rose 49 points, the biggest single-day gain this month, pushing market capitalisation to Sh2.415 trillion, from Sh2.39 trillion last Friday.

The number of shares traded was, however, lower at 16.9 million compared to Friday’s 18.8 million, although the number of deals concluded rose to 1,177 from 1,070.

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Business sentiment

Analysts said they expected the general business sentiment to improve in the coming days in addition to the stock market gains, offering hope that the politics-battered economy could see some improvement going into 2018.

“The political impasse, coming against a backdrop of drought and slow credit growth, was a big factor in the slowdown we have seen in recent months. This outcome presents a slightly better investment case for Kenya compared to three months ago,” said Stanbic #ticker:CFC regional economist Jibran Qureishi.

“We have already seen some post-petition sentiment rally in the shilling and the Eurobond yield. Overall, the fundamentals are not bad for the economy.”

The stock market has in recent weeks absorbed some losses as the political noise intensified, slamming the brakes on a recovery that began in the second quarter of the year.

The shilling has been largely stable this year, partly relying on support from the central bank, which has intervened regularly to stave off volatility by selling dollars into the market or draining liquidity from the money markets.

Independent analyst Aly-Khan Satchu said he is expecting bullish markets in the remaining weeks of the year, adding that further delay in resolving the elections impasse would have been damaging.

Return to normalcy

Yesterday’s decision offered a chance for Kenya to return to normalcy after a divisive presidential election that dragged on for more than three months following the annulment of the August 8 poll. Chief Justice David Maraga said the “petitions were not merited”, a decision he added was reached unanimously by the six-judge bench.

Businesses and investors will now keenly watch opposition Nasa coalition’s next move. The alliance, which stayed out of the repeat poll and has called for a boycott of firms perceived to be in support of the Mr Kenyatta’s Jubilee Party, said yesterday it had no position on the court decision – but maintained it did not recognise Mr Kenyatta as President and would proceed with its political action plan aimed at effecting reform in the country and ending electoral theft.

In recent days, opposition protests have been characterised by violent confrontations with police that have affected business in some parts of the city.

Yesterday, some businesses in Nairobi remained closed fearing violent reactions to the Supreme Court decision – leaving a large number of parking spots in the CBD empty.

Eurobond

Investor sentiments on Kenya in the international markets remained largely positive. The yields on Kenya’s 10-year Eurobond fell below six per cent to 5.96 per cent from Frida’s 6.07 per cent. The one-year average for the paper that matures in 2024 stands at 6.27 per cent.

The yield on the sovereign bond stood at 7.8 per cent at the beginning of the year and the decline is seen as indicating that investors are placing lower risk premium on Kenya’s foreign borrowing, even as questions remain over the growing mountain of national debt.

“The declining Eurobond yields and stable rating by Standard & Poor (S&P), in spite of the political uncertainty around the presidential poll re-run, are indications that Kenya’s macro-economic environment remains stable and hence an attractive investment destination,” said Cytonn Investments analysts in a market note.

The lower yields bode well for the Treasury, which is preparing to dip into the external market to raise funds to pay off part of the maturing foreign debt and to fill the gaping budget deficit that is expected to run to Sh691.2 billion or 7.9 per cent of GDP in this fiscal year.

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