CMA assures over market bear run

February 5, 2009
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, NAIROBI, Kenya, Feb 5 – The Capital Markets Authority (CMA) has assured investors of stability in the stock markets, but admits stockbrokers are in turmoil following a prolonged bear run.

The regulator released a statement Thursday morning as pessimism spread over the health of the local market.

“This is not unique to our market as this trend is being experienced globally,” CMA boss Stella Kilonzo said.

She explained that the Nairobi Stock Exchange (NSE) has specifically experienced similar bear runs in the past.

“Most recently between October 2000 and September 2002 the share index declined by 50 percent from a high of 2043 points to a low of 1043 points. Similarly, the market capitalisation declined from Sh101.4 billion to Sh85.7 billion,” Ms Kilonzo pointed out.

And the CEO predicted that trimming costs was inevitable, including giving some workers the sack.

“As a result of reduced activity, market intermediaries have experienced low turnover and therefore low commissions. Just like in any other businesses, cost cutting operational measures have to be adopted by market intermediaries including staff layoffs and closure of branch offices,” Ms Kilonzo stated.

She said the CMA was however taking the bear run seriously and “working on major regulatory reform of the capital markets together with systems that will increase confidence in the capital markets.”
 
“The Authority is working with the industry to strengthen internal controls in order to mitigate the risks that could arise due to fraud. Fraud is widespread in all industries and businesses and is not restricted to in the capital markets industry alone. The remedy is to identify and mitigate fraud risks,” she said.

“We have identified the implementation of strong back office operations for market intermediaries and the implementation of appropriate risk management systems as the appropriate solution.

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