NSE hits 16-year low as blue chip stocks plunge over coronavirus fears

Nairobi Securities Exchange (NSE). FILE PHOTO | NMG "The market is falling primarily because of risk aversion by foreign investors in the wake of the coronavirus," said Martin Mwirigi, an analyst at Standard Investment Bank (SIB).

He said that foreign investors, who make up about 70 percent of daily trading at the NSE, have been net sellers in the past three weeks.

They have also been selling stocks in other markets including the United States, Japan, the United Kingdom and Australia.

The virus has wiped equity values due to mounting concern that the outbreak will stunt economic growth and corporate profits. Stocks favoured by foreign investors and which make up the NSE-20 share index like Safaricom, Equity Bank , EABL and Bamburi Cement have shed values over the past week. Owners of bank shares have lost billions of shillings over the past month as investors take profits from the rally that followed the removal of the cap on commercial lending rates.

All the 10 banks have reported declines in share prices since February 1 on what stock dealers linked to increased supply of the lenders’ stocks amid thin demand ahead of the results announcement season, hurting investors.

Stock broker Apex Africa Capital noted that major indices around the world including the FTSE 100, Nasdaq and Dow have all dropped 11 percent or more in one week.

Apex noted that KCB , Equity and Safaricom saw the most selling pressure in recent days as measured by the value of foreigners’ exit trades.

First cases of the flu-like illness, also known as Covid-19, were reported in countries as far apart as China, Mexico, Nigeria, Iceland and New Zealand and the number of confirmed infections has in recent weeks risen to nearly 84,000 while deaths from the virus have surpassed 2,800.

Weakening demand

The disease, which has an estimated mortality rate of two percent, has paralysed economic activities in parts of China where most consumer goods are manufactured.

Other countries to which the disease has spread such as Japan and Italy have also responded by curtailing public meetings, with numerous businesses shutting down plants and stores.The scare is disrupting supply chains and weakening demand for goods and services worldwide, raising the spectre of a substantial reduction in global economic growth.At the NSE, fears have outweighed expectations of dividend payments starting April for most companies whose financial year ended in December. These include banks, which are set to announce their results […]

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