Kenya: Dusty Storm Sweeps Through Sh2 Trillion Stock Market

There is a dusty wind blowing up a storm through the dessert that is the floor of the Nairobi Securities Exchange.

The market that is supposed to hold Sh2.278 trillion, which is 30 per cent of the country’s Gross Domestic Product has no takers sending down stock prices and wiping out billions of shillings in paper wealth.

Walking through its vacant isles, you see a ghost town with rickety store fronts, discoloured dead stock and owners sapped dry with only one distant corner of refuge where all the market players are huddled for safety of their last pieces of silver as they watch advance of the great drought on returns.

A review by Smart Company last week showed that when the market opened on Tuesday, after Eid ul Adha celebrations, 17 counters had zero transactions and 11 counters had transactions that were less than 1,000.

On Wednesday, the situation worsened as 21 counters went without trading while seven had less than 1,000 stocks exchanged.

Three counters have been shuttered for a while, KenolKobil which has since decided to take business private, and Athi River Mining and Deacons which have gone kaput.

The NSE benchmark index, NSE 20 share, which captures movement of select blue chip stocks, is down to 2,552.19 points — a level last seen in March 2009 a decade ago.

In 2014, the Capital Markets Authority had drawn up plans to boost corporate bond markets to 40 per cent of the Gross Domestic Product by 2023 but now risk having this at zero.

Since April 2017 when EABL issued a bond, no other Kenyan firm has sought long-term debt from the capital markets to date.

And in the next six months nine corporate bonds will mature in Kenya, six will mature in 2020, four in 2021 and two in 2022. Then there will not be a single corporate bond in Kenya, East Africa’s biggest economy and most liquid capital market unless something is done to mitigate the waning fortunes.

The NSE is at a crossroads that has led the market to stop and try to understand what is happening, but have they found the answers yet?According to a Soundness report released two weeks ago, the Capital Markets Authority (CMA) seems to think the problem may lie in fewer illiquid counters."Kenya’s equity turnover levels remain low in comparison with global peers. This has mainly been attributed to limited options of counters to trade on with major trading reflected […]

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