Going through a heartbreak? No worries, the music has got you covered. From the timeless classics - “Ain’t No Sunshine” (Bill Withers) and “Walk On By” (Isaac Hayes) - to some under-the-radar favourites like “Just a Friend” (Biz Markie) and “We can’t be friends” (Deborah Cox), all come in handy when dealing with a broken heart.
Spotify says there are over half a million break-up themed playlists on the platform alone. Incredible. I argue here there’s a good reason why Taylor Swift is the top artist of her generation - all she writes are breakup songs. But where do investors find comfort when the stock market is going nowhere?
I was reading an article the other day that mentioned that about 97.5 percent or 1.5 million accounts used for share trading at the Nairobi Securities Exchange (NSE) have been frozen after remaining inactive for over two years.
While there are many reasons behind this, the term “investor fatigue” comes to mind.
I believe retail investors are just not enthusiastic anymore. We are trading at lows last witnessed in April 2003. We have been on a steady bear run since January 2015. And the same picture from the outside looking in.
Taking annualised figures, the MSCI Kenya Index (USD) shows how the large and mid-cap segments of the Kenya market have posted negatively - 21.66 percent in the past three years, seven percent in the five years and two percent in the 10 years.
It’s just really hard to go through these times.
But to answer our question, I think solace can be found in the market itself.
You see, moving back in history, some of the old heads will remember that the five year period ending in 2002 spotted similar characteristics as now.
The market was in a painful, extended decline. Average interest rates for 91 day Treasury Bills topped 20 percent in 1999 - high rates were due to increased domestic borrowing by the government to meet its expenditure requirements as a consequence of revenue shortfall.
Non-performing loans (against total loans) reached scary levels of 30 percent. The NSE 20-share index fell from 2,303 points in 1999 to 1,363 points in 2002, while the total number of listed companies also dropped from 54 to 51.
Oil prices doubled in the same period and so on. But then came the mighty recovery that lasted way into the 2,000s.
Here’s the takeaway; this isn’t something that’s new to the markets, it happens from time to time.
One more thing, the US Fed is widely expected to start cutting rates with some pundits speculating a 50 basis point cut by next week.
If it pans out, that is likely to lift most emerging markets. Remember, when the Fed began cutting rates between 2001 and 2003 (after the dot-com bust), a lot of inflows were reported in these markets.
Thankfully, the Central Bank of Kenya has cut its base rate to 12.5 percent. I am tempted to say, rate cuts usually mark the bottom. But usually does not mean always.
Anyway, no one likes a bear, and it’s no fun to be bearish. And since there’s no Patti La Belle song to soothe the pain, history is the only solace we have.
Mr Mwanyasi is MD, Canaan Capital Limited
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