It is now evident that if the current political crisis is not resolved as soon as possible the NSE that is often the barometer of economic growth is in for the most volatile period with suppressed activity despite entry of foreign investors into the market.
Since the year began, the NSE has shed Sh44 billion in market capitalization from a high of Sh851 billion at the beginning of the year to Sh810 billion as at the close of trading yesterday - a five per cent drop.
During the same period, equity turnover has declined by almost 30 per cent from daily trades worth Sh505 million on December 24 last year to Sh347 million at the close of trading yesterday.
Economists had predicted a slow down in the economy pointing to a dip in tourism revenues, disruption of agricultural production and lower business turnovers in the wake of recent political turmoil.
Pundits have been quite to point out that a speedy resolution of the current stalemate and rejuvenated investor confidence is key to a speedy economic recovery and renewed momentum in the equity market.
Post Election Violence
The outbreak of post-election violence has eroded investor confidence in the market leading to some of the most aggressive sale of shares at the bourse with retail investors as the most active.
The market was throughout January characterised by thin trades with retail investors - rushing to liquidate their positions in the short term - as the main sources of supply.
Battered investor confidence has seen institutional investors concede that any resumption of normalcy at the stock market depends on a speedy settlement of the political crisis.
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Wednesday, February 27, 2008