Kenya Capital Markets under the Microscope

The Kenyan capital markets is now under focus against a backdrop of shrinking investor confidence and continually droping market index in defiance of any fundamentals. Other stockbroking firms including Suntra Investment Bank are struggling over pending lawsuits due to illegal selling of investors shares.
CFC Financials had also been sued over illegal short selling of a client's shares and the landmark ruling requiring them to pay back Millions is set to change the financial landscape and send shivers down the spines of other struggling stockbrokers who may have been doing the same scheme in full glare of the CDSC and the CMA.

Radical Surgery
The current NSE meltdown has brought to the fore the urgent need for radical surgery of the Capital Markets Authority and the NSE as well as stringent regulations on stockbrokers and investment banks inorder to bring back the much needed market rescusitation.

Stockbrokers
Since the collapse of Francis Thuo, Discount and placing of Nyaga under statutory management many had been wary of venturing into the market worst hit being foreign investors. Infact foreign investors and Kenyans in Diaspora have been flooding the market with orders to sell stock as they seek safe havens to hedge against risk associated with global financial crisis.

Facts
The sharp drop in the NSE 20-Share Index from over 6000 to 2927 by Monday after an unprecedented rise of 279% by December 2007. Market capitalisation has dropped from 1.3 Trillion in June 2008 to slighty over 700 Billion this week.

Reforms
Though the capital markets is said to have been pursuing reforms in the capital markets, radical surgery of stockbrokers, investment banks, Nairobi Stock Exchange and Capital Markets Authority is urgently needed and the time is NOW!

Kenya Economy Reeling From Post Election Violence

Economy
The orgy of violence that has greeted Kenya's disputed election result has led to hundreds of deaths and forced tens of thousands to flee their homes.The post election violence witnessed in various parts of Kenya has indeed raised pertinent questions on the resilience of the economy to sustain long periods of civil unrest and violence.

Tourism
Kenya's tourism industry, which brings in some $900m (£455m) a year and attracts more than one million visitors a year, is sure to take a hit after four days of rioting and ethnic clashes. Its relative economic success has been helped in part by its thriving tourist sector, with visitors attracted by its abundant wildlife and pristine beaches.Provisional figures for 2006 from the Kenya's tourist board said the country had received 1.5 million visitors for the year, a growth of 5.2 per cent.

Repercussions
The stalemate over the election results has cost the economy billions of shillings with the repercussions being felt across East Africa.

Bankers Analysis
Several bodies including the Treasury, Nairobi Stock Exchange, Tourism sector, and financial organizations have given their predictions and analysis of the implication of the destruction and sporadic violence that errupted in the country against a backdrop of controvesial presidential elections and delays in announcements.
The effects are indeed immense and portends widespread implication for Kenya as an emerging economy that has recently been rated the fast growing and most preferred by investors seeking emerging markets.

East Africa
The pinch on the economy is not only being felt locally with close to 4B having been lost but has spilt to Uganda, Tanzania Rwanda and Burundi where essential products were not forthcoming as fuel passing through Kenya was unavailable due to closure of roads and violence.

Central Bank of Kenya analysis
Kenya’s economy has grown steadily in the past five years with all indicators pointing out that if the trend was sustained, growth would hit 10 per cent. The economic recovery that started in 2003 has achieved some major milestones and laid down solidly the growth fundamentals. The growth fundamentals laid down have reversed growth decline that had taken years. It is true that the recent violence in some parts of the country could adversely affect the tempo of economic activity, but cannot destroy the growth fundamentals so far laid down. more

Foreign investors
Private investment has been behind Kenya's thriving economy. It has averaged GDP growth of 5% since 2002 and the economy is expected to expand by 7% in 2007 - rates of growth that are only beaten in booming Asian countries such as China.
Kenya's shilling strengthened by 9% against the dollar in 2007 as foreign investors poured into the country's stocks and bonds, but those gains were largely erased when currency markets began trading on Wednesday.

Equity Market
The equity market on the Nairobi Stock Exchange lost 40 billion Kenyan Shillings ($591 million) in value on its first day of New Year trading Wednesday. Kenya has attracted a large number of multi-nationals and is home to one of the world's fastest growing stock exchanges.

Positive Prospects
Expected planned sale of Safaricom shares might stir the market once again back to its feet .

Foreign Investors Back with a Bang

Foreigners Flock NSE
Despite the recent jitters about the stock market that saw various politicians make remarks about the stock market, indications are ripe that foreign investors are not shying away from the Nairobi Stock Exchange.
Infact over the last few weeks insiders have it that foreign investors are now flocking the NSE. Their deals in some days have accounted for more than 40 per cent of the trades in a number of counters.

Blue Chips
It appears that the target of this investors are blue chips including, East African Breweries Limited (EABL), Kenya Airways (KQ), Barclays Bank (BBK), Kenya Commercial Bank (KCB), Mumias Sugar Company (MSC), Kenya Electricity Generating Company (Kengen) and recent debutant to the NSE Kenya Reinsurance (Kenya Re) amongst others.

Economic Fundamentals
It is noteworthy therefore that the re-entry of foreign investors into the local equity market is a clear indicator of the strong perception of the country’s economic fundamentals and favourable corporate earnings projections in the country despite the impending elections that has been expected to send these investors packing due to uncertainty of the election outcomes.

Political Comments
The recent reassurance by some presidential candidates on their support for the goings-on at the NSE against a backdrop of earlier negative comments on the sam market is welcome and is a positive signal to more foreign investors as well as local investors to flock the NSE in preparation for the Safaricom IPO.

Safaricom IPO
There are strong indications that various players across the global divide (From Wallstreet to Kimathi Street) are positioning themselves to invest in this most profitable company that raked in 17B profir last year and expected to beat such feats given its current products that have been positively received by customers including MPESA service. Their expansion programs are also welcome and it is a matter of time before we proudly own THE BETTER OPTION.