NSE hits 16-year low as blue chip stocks plunge

Nairobi Securities Exchange (NSE). FILE PHOTO | NMG The Nairobi Securities Exchange (NSE) main index dropped to a 16-year low on Friday as foreign investors withdrew amid turmoil in global markets over the coronavirus outbreak and profit-taking hit banking stocks.

The benchmark NSE 20 Share Index, which captures the movement of select blue chip stocks like Safaricom and East African Breweries Limited (EABL), closed at 2,337 points, down from 2,409 on Thursday.

The last time it was near this level was on September 26, 2003, when it closed at 2,328 points when Kenya was at the infancy of Mwai Kibaki’s administration, which is associated with the country’s economic resurgence and a stock market boom that created many millionaires.

Analysts have argued that the sell-off is part of a global trend as investors dump stocks and seek shelter in fixed income assets including government bonds.

"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 […]

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