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Investors advised to hang on

NAIROBI, October 28 – Investors in the stock market have been advised to hold on to their shares or buy more at the current low prices as the best way of cushioning themselves from losses in the stock market.

Investment Manager at Sanlam Investment Eric Kibe said the current bear at the bourse was driven more by market sentiment as opposed to reduced economic value of companies.

Speaking to Capital Business on Tuesday Mr Kibe pointed out that an investor had to have long-term orientation and patience while investing in the stock market and cannot assume that prices would increase dramatically over the short term.

“Broadly, we can say there is value in the market though it has dropped to the level at which it is largely as a result of very sour sentiment. I wouldn’t say that economic conditions or corporate fundamentals have deteriorated that much. For instance, if you say that company ‘X’ share price has halved, I would doubt whether its economic performance has halved and I think we can say broadly there is value in the market,” he said.

While acknowledging that sentiment would always affect the share market he advised investors to base their investment decisions on real market fundamentals.

Mr Kibe is advising at least a three year waiting period for an investor to make returns in the market.

He supported the view that the on-going bearish market may not really be blamed on the global crisis except in counters where foreign investors were involved.

Mr Kibe however noted that reduced receipts from export markets, runaway inflation and a weakening shilling may have a negative impact on general economic activity in the country.

“In terms of the outlook to the extent that there is a global recession then there will be an impact on our economic fundamentals, export receipts from  horticulture, agriculture, exports, tourism, I think the jury is still out there about the extent to which a global economic slow down would manifest negatively on our economy,” Mr Kibe said.

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He however accepts that there is a place for investor education in the country to improve awareness and allow more informed decisions by investors.

At the same time kibe feels the capital markets Authority is not fully to blame for the governance issues that have afflicted the market off late noting that CMA can only police to the extent to which investment banks report their finances.   

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