Global market swings sway Nairobi securities exchange trading

The Kenyan financial market, like others in the frontier markets, have this year moved in line with global economic developments, with investors on the Nairobi Securities Exchange #ticker:NSE (NSE) getting the short end of the stick.

Investors’ wealth fell by nearly 17 percent during the year while yields on sovereign bonds have taken a hit immediately there are major announcements of changes in US interest rates, indicating coupling of domestic and international markets unlike in the period immediately after the global financial crisis when analysts concluded many frontier and emerging markets were decoupled.

The Federal Reserve has raised the benchmark rate by small amounts this year.

In June, for example, the Fed rate was raised and yields on Kenyan Eurobond immediately rose by at least a percentage point.

Last week, the Eurobond yields also rose and the NSE market capitalisation declined following the increase in the Fed rate.

This was following a trend that has been seen from the beginning of the year, also attributed to the expectation that the US would raise the rates thereby causing global investors to move cash from frontier and emerging markets to the developed markets.

Data from Standard Investment Bank show that foreign investors withdrew a net of $75.09 million (or Sh7.6 billion) during the first quarter of the year followed by another $81.59 million (or Sh8.3 billion) in the second quarter and $66.48 million (or Sh6.7 billion) in the third quarter. In October, they withdrew $42.25 million (or Sh4.3 billion) and $5.82 million (or Sh590 million) last month.

In the meantime, the NSE market capitalisation fell during the year to December 20 by about 17 per cent to stand at Sh2.09 trillion. The yields on the Kenyan Eurobonds have increased by up to two percentage points compared to the beginning of the year, indicating the country could pay higher rate of interest should it go to borrow commercially in the global markets.