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Capital Markets

Investors count losses as NSE trade system fails

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Stockbrokers at the Nairobi Securities Exchange. FILE PHOTO | NMG 

A system outage left Nairobi Securities Exchange (NSE) #ticker:NSE investors counting heavy losses as trading was halted for about half of the day on Monday.

The trading halt, attributed to a ‘technical hitch’ at the NSE, made it impossible to buy or sell shares.
It is the latest in a streak of costly glitches at the NSE in recent years.

“The NSE wishes to notify market participants, investors, key stakeholders and the general public that trading at the NSE has been temporarily halted due to a technical hitch which occurred on January 8, 2019 at 11.52 a.m.,” said the NSE in a statement.

“The aforementioned has affected trading of equities resulting in a market halt.”

The bourse said it was working to resolve the glitch ahead of today’s fresh trading session. “Our technical teams are working towards resolving the issue in the shortest time possible, with the intention to restore normal trading hours by January 9, 2019,” it said.

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Stockbrokers in particular lose whenever there is limited or no trading, given that they derive their income from the commissions charged on trades.

The NSE’s Automated Trading System (ATS) connects remotely to stockbroker offices, allowing them to trade from their premises.

The ATS system came live in September 2006, replacing the open outcry system that had been in place since the establishment of the bourse. The loss of a half a day’s trading is likely to depress the market numbers for this week.

Resumption of trading today is also likely to see heightened trading on the back of pent-up demand.

The slide in Safaricom’s #ticker:SCOM share by more than a third at the NSE has pulled down the stock market to a 19-month low, reflecting the outsized influence the telecommunications firm wields on the market.

Safaricom, which hit an all-time high of Sh33.50 last April, is also trading at a 19-month low of Sh21.45 a share attributed to the heavy foreign investor sales seen on the counter in the past year.

Investor wealth at the bourse stood at Sh2.055 trillion Monday, having fallen by Sh47 billion in the first week of the year, and by Sh510 billion in the past 12 months.

Low share prices

This resulted in the main indices taking a beating last year, with the NSE 20 share index ending 2018 23.7 percent down at 2,833 points, and the NSE All Share Index 18 percent down at 140.43 points.

In the first trading week of 2019, the two indices are already in the red, both down by 2.2 percent in closing Monday at 2,771 points for the NSE 20 and 137.35 points for the NSE All Share Index.

While analysts are hopeful that the current low share prices at the bourse will act as a catalyst to encourage investors to buy stocks, and in the process lead to a recovery, concerns remain on the lingering effect of the sales by foreign investors.

“The equities market is expected to recover in 2019 as cheap valuations currently exist in the market which is bound to interest investors,” said Genghis Capital analyst Patrick Mumu.

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