NSE grapples with investor jitters as Covid-19 resurgence hits gains

The stock market may stick in the woods for some time, despite stocks prices beginning to react positively with the reopening of the economy.

Trading of equities at the Nairobi Securities Exchange (NSE) has been bumpy since the strike of the coronavirus in the country in March, as the period has been characterised by huge foreign investor sell-off while local investors remained hesitant to buy.

Analysts argue that the recovery of the markets is still unpredictable. However, any vaccine would help prop up the activities.

“The outlook remains patchy as the resolution of the pandemic has not been fully hammered out,” says Churchill Ogutu, head of research at Genghis Capital Limited.

“Granted there is positive news of a first successful vaccine discovery that should propel positive sentiment in the markets. But that said, investors, will continue looking at the individual counters to see how they are positioning themselves.”

The onset of coronavirus in global markets saw NSE drop to an 18-year low in late March as foreign investors rushed to withdraw their capital due to unrest in their home.

This was followed by a halt in trading at the local bourse on March 13 after a fall by five per cent on the NSE 20 Share Index, triggered by the first reported Covid-19 case.

The last time there was such a halt was after the Supreme Court nullification of the presidential results in August 2017.

“Outside that initial shock, the market activity has been driven by broad-based weak sentiment and deteriorated fundamentals,” added Mr Ogutu.

Since the beginning of the year, foreign investors’ outflows were recorded at Sh27.30 billion in the nine months to September, according to data by Capital Markets Authority (CMA).

Most of the months in the troubled year saw net selling by the investors in contrast from January, August and September where net buying of Sh530 million, Sh10 million and Sh802 million was recorded respectively.The CMA data also showed the net outflows were six times more than Sh4.33 billion outflows recorded in the same period last year.The sell-off affected some blue-chip stocks like telco giant Safaricom and banking sector stocks such as KCB Group, Equity Bank, Cooperative Bank of Kenya as well as East African Breweries Limited.This saw market capitalisation at the bourse hit lowest levels below Sh2 trillion mark to Sh1.945 trillion in August as investors lost their wealth following share price erosion.Most firms dropped dividend payments due to expected declined revenues and restructured loans […]

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