NSE defies terror attack, gains Sh19bn in a day

Markets Wednesday shrugged off Tuesday’s terror attack on Nairobi’s 14 Riverside commercial complex, as the Nairobi Securities Exchange (NSE) rose sharply to a three-month high and the shilling held steady against the dollar.

Previous terror attacks in the country have seen the markets wobble on investor fears.

But the reaction to Tuesday’s siege was that of defiance as the NSE 20-Share Index made its biggest one-day gain this year of 32.3 points to end the day at 2,844 points.

Market capitalisation — the measure of investor wealth — rose by Sh19 billion yesterday to Sh2.167 trillion.

The shilling stood its ground against the dollar, trading at 101.72 units against the US currency in the interbank market, unchanged from Tuesday.

Foreign investors accounted for the bulk of trades at the NSE yesterday, indicating that they had not been spooked by the attack, with local investors showing robust demand for shares.

Standard Investment Bank (SIB) head of research Eric Musau said in an interview the markets reacted positively to the quick resolution of the hold-up, compared to previous attacks on the city such as the one at Westgate Mall in 2013.

“The resolution for this one was a lot quicker and the security response was organised, especially considering the size of the complex. This gave a positive signal to the market,” said Mr Musau.

“The bulk of the trades at the NSE were on the foreign desk at 82.6 per cent, coupled with solid demand from local investors.”

Independent investment analyst Aly-Khan Satchu said foreign investment banks and funds were actively buying large cap stocks, backing gains in the market.

Mr Satchu added that the sentiment among investors was that the attack was a one-off, as opposed to the start of a new round of terror attacks in the city, hence the bounce in the market. Activity was up in the bonds market, with turnover rising from Sh1.6 billion on Tuesday to Sh2.1 billion yesterday.

Foreign dollar inflows supported the shilling, led by remittances and agriculture export earnings. The central bank also weighed in by mopping up excess liquidity through the repo market, taking out Sh14.5 billion on the day.

The reaction of the markets this year is in some contrast to past terror attacks in the country, whose immediate aftermath saw a downturn in both the NSE and a weakening of the shilling.

Following the September 2013 attack on the Westgate Mall in which 68 people died, the NSE saw two straight losing sessions before recovering its footing. The shilling, which at the time was in the middle of an appreciation streak, followed suit by weakening for two straight days.

A similar trend was seen following the April 2015 Garissa University attack that claimed 147 lives, when the shilling reacted by weakening by 20 cents to 98.80, and the stock market slid for four straight sessions.

Tuesday’s attack had much lower fatalities at 14, according to official statements yesterday, and it took about 12 hours before the attackers were subdued by security forces.

In contrast, the Westgate attack took days to resolve, leading to prolonged tension in the city, which affected businesses and markets.

Operators in the security-sensitive tourism sector have also expressed optimism that Tuesday’s attack will not dent the current growth trend the sector has been enjoying in the past year, citing the swift reaction of security agencies and quick resolution of the situation.

Kenya Tourism Federation (KTF) chairman Mohammed Hersi said that in the past, Kenya would have been singled out with travel advisories following an attack, but now due to similar incidences around the world there is more compassion towards any country that becomes a victim.

“We have had calm in the past few years, having learnt from previous mistakes, so this incident should not mess up the industry. Western embassies have also shown understanding and not issued travel advisories,” he said.

They will be hoping to avoid a repeat of the woes that hit the sector between 2013 and 2015, when earnings from tourism dropped from Sh94 billion to Sh84.6 billion as tourists kept away on terror fears.

The sector last year performed well as arrivals crossed the two million mark for the first time, which resulted in a 31.3 per cent rise in earnings to Sh157 billion compared to the Sh119 billion earned in 2017.