NAIROBI, October 9 – Blue-chip companies continued their free fall at the Nairobi Stock Exchange on Thursday as investor panic drove mass exit.
Safaricom, which accounts for over 90 percent of the turnover traded at the Nairobi Stock Exchange (NSE) dipped by eight percent to close trading at Sh3.70.
Other major losers included Equity Bank that lost Sh9 to Sh190, Standard Chartered Bank which had lost eight shillings to Sh171, and Kenya Airways that dipped from Sh41 on Wednesday to Sh37.75.
Financial analysts said the market was at its lowest level in five years and this was likely to attract institutions and other long-term investors to the market to buy the attractively priced counters.
The markets experienced the lowest slump in recent months on Wednesday, when the NSE-20 Share Index dropped by five percent, leading to a statutory 15 minutes closure.
NSE Chief Executive Officer Chris Mwebesa had explained that the situation was a result of the current global panic after the collapse of financial institutions.
The decline has been attributed to several factors including a significant sell-off by foreign investors following the global credit crunch. The investors are said to be risk-averse and are exiting emerging markets like Kenya.
“The delay in the Safaricom IPO refunds also denied the market much liquidity because those funds would have gone into buying equity investments,” said AIG Investments Head of Research Edward Gitahi.
He added that the higher inflation didn’t help matters either as it eroded the disposable income available to retail investors.
The National Economic and Social Council (NESC) also predicted further declines on the market, citing declining remittances from Kenyans in the Diaspora.
NESC Secretary Julius Muia told Capital Business that the tourism industry would also be among those to suffer.
“We are going to see a bit of a problem in terms of tourist arrivals and how much they are spending here. With regard to our exports of cut flowers, we might realise that the market is not growing as fast or it may shrink,” he warned in a grim forecast.
Mr Muia said the council was closely monitoring the worrying domino effect and would advise the Government accordingly.
The world crisis, he explained, was affecting the markets that have very close links with the US and Europe.
The financial meltdown was triggered by a sub-prime mortgage crisis in the United States forcing that country to pass an urgent $700 billion bailout plan for home-buyers.
The UK and Asian countries have poured cash into their money markets in a bid to calm the volatility.