The Nairobi Securities Exchange (NSE) rallied to a three-month high in a week of relative calm that followed the Supreme Court’s Monday decision to confirm Uhuru Kenyatta as the winner of the October 26 repeat presidential election.
Market data showed that total investor wealth or market capitalisation increased Sh70 billion as investors rushed in to take positions after months of political turmoil.
The NSE All Share Index, which tracks the performance of all listed stocks at the bourse stood at 167 points Thursday, its highest level since the end of August.
Investor wealth as measured by total market capitalisation now stands at Sh2.46 trillion, compared to Sh2.39 trillion on Monday.
The stock market thrives on economic stability, which gives investors confidence that the companies they invest in will yield a return.
The prospects of a return to normalcy on the political front has seen foreign investors troop back to the market, reversing the cautious approach they had maintained since August.
NIC Securities analyst Bill Oloo said that the market was partly being driven by investor exuberance that has pushed some stocks to trade above their fair value.
That means there is bound to be some profit taking, especially on counters with a large free float in the hands of retail investors.
“We can conclude that investor sentiment is positive. From Monday to Wednesday, foreigners net bought Sh251 million ($2.4 million) worth of stocks, having been largely net sellers in the past four weeks or so,” said Mr Oloo.
Safaricom #ticker:SCOM has driven most of this week’s gains, having touched an all-time trading high of Sh28.50 on Wednesday before closing at Sh28.
The stock however shed Sh1.50 Thursday to close at Sh26.50, in what analysts said signalled profit taking.
There was also some retreat by big bank stocks such as KCB, Equity, Cooperative Bank and Standard Chartered, whose share prices had been rising steadily in the first three trading sessions of the week.
But even as the markets react positively, Kenya remained far from resolving its political challenges. Opposition Nasa coalition has refused to recognise the results of the October 26 poll, even as President Uhuru Kenyatta prepared to be sworn in for his second term on Tuesday.
Nasa has embarked on a campaign of disobedience, which includes economic boycott of certain companies products is expected to continue upsetting the economic environment at least in the medium term.
“We should (however) also point out that the political cycle is yet to conclude despite the Supreme Court decision on Monday. We would therefore urge investors to opt for defensive rather than cyclical stocks until the dust settles as they are likely to ride out the negative sentiment that engulfs the market once political uncertainties kick in,” Mr Oloo said.
In the currency market, the shilling continued gaining on the dollar to touch a two month high, building on the gains made in the first here days of the week.
Reuters news agency reported that commercial banks were quoting the shilling at 103.00/20 per dollar in morning trading, its highest level since September 15. It had closed at 103.29/49 on Wednesday.