Markets steady after referendum

The markets remained steady on the outcome of the referendum as shares stabilised and the shilling remained firm against the dollar on Friday after making gains on Thursday.

Shares at the Nairobi Stock Exchange (NSE) gained across most counters pushing the market index up by 0.10 points to close trading at 102.26 points on higher demand, notably from foreign investors amid thin supply.

The shilling was steady against the dollar at Sh79.60, a marginal decline from Sh79.50 per dollar at the close of trading on Thursday, as traders took time to assess the likely impact of the new constitution on dollar flows.

“The shilling has been fairly stable today trading at about Sh79.60 per dollar, the same level it closed at yesterday, even with the Central Bank coming in to buy about Sh8 million worth of foreign currencies today,” said Moses Kiboi, head of trading at Citibank.

Investor interest

Commercial banks exchanged the shilling at 79.55/65 per dollar in early trade, the same as Thursday’s close, and it stayed in the range of 79.40-79.80 during the day closing at Sh79.60.

At the NSE, trading was up on Friday compared to Thursday even as both equity turnover and shares traded increased.

The number of shares traded increased to 25 million, from 24 million, while turnover increased to Sh620 million from Sh499 million.

Upward trajectory

The last five trading sessions had added more than 300 points to the NSE 20 share index, indicating a higher momentum than that witnessed during the second quarter of the year when the referendum date on the proposed constitution was announced.

Market players attributed the upwards trajectory to foreign investors’ renewed confidence in the bourse.

“We expect demand to remain steady on most counters since there is renewed foreign investor interest. They want to cash in on growing optimism,” said Wyclif Masinde, an investment analyst at Kestrel Investment Bank. “The banking sector started posting high results in the last two days and this will further help regain confidence in the bourse,” added Mr Masinde.

Financial analysts were optimistic that the index could rise a further 25 per cent, crossing the 5,000 points by year-end on reducing political risk.

The Sh79.65 level to the dollar exchange rate was last seen in early June.

The shilling, which is said to be riding on the back of major world currencies that have strengthened against the US dollar, is likely to reach the Sh79 per dollar mark in the short term.

“We had seen the shilling remain depreciated even with the euro recovering from the financial crisis that emanated from Greece, meaning that the effects of the euro crisis on the shilling were exaggerated by the political uncertainty brought about by the expected referendum,” said Mr Kiboi.