Stock market surge lifts NSE Index to two-year high

Share prices at the Nairobi Securities Exchange (NSE) on Monday rose to levels last seen in February 2011, with four counters hitting new one-year highs.

Trading at the Nairobi bourse has been robust since the start of this year and the NSE 20 Share Index — which tracks the prices of the 20 most traded stocks — on Monday closed at 4,413.97, an increase of 280.95 points since January 2, the first day of trading in 2013.

During Monday’s trade, KCB Group, energy company KenGen, cigarette maker British American Tobacco and East African Breweries hit new highs driven by high investor demand.

KCB Group hit a high of Sh35, Kengen hit Sh11.10, BAT reached Sh540 and EABL was at a high of 306. But the total value of shares traded dropped to Sh294 million compared to Sh478.76 million last Friday.

Since the start of this year, foreign investors have been the main buyers of shares at the NSE, attracted by prospects of higher returns than in their home countries.

READ: Blue chip stocks hit new high as demand rises

Their appetite for riskier assets also went up particularly after legislation was passed in the US that stopped the country from going into a financial crisis at the beginning of this year.

Companies whose shares are liquid, those that have a higher market capitalisation and those that are tracked by global data and index providers have become favourites of foreign investors.

Burbidge Capital managing director Edward Burbidge last week said the outlook for the year was promising, with higher economic growth attracting increased foreign interest in private and quoted equities.

He said the implementation of the new Constitution was expected to bring in more investment opportunities to Kenya, now one of the fastest growing frontier markets, especially with the discovery of oil.

James Dry, managing director of Dry Associates, last week also told the Business Daily that foreign investor interest in offshore stocks had gone up particularly after legislators in the US early this year passed a law that helped the country avoid a financial crisis.

Smooth transition

This made it possible for investors to take on riskier assets outside the world’s largest economy.

Mr Dry said investors were also expecting Kenya’s elections and transition of power to be smooth, although he projected a gradual slowdown but without eroding the gains made.

“What you are seeing is a reconfirmation of faith after the US avoided the fiscal cliff and this leads investors to think that the same thing (avoidance of political crisis) will happen here,” said Mr Dry.