NAIROBI, Kenya, Dec 10 – The Nairobi Stock Exchange (NSE) Chairman Mr James Wangunyu has said the government should immediately intervene to stop the bear run in the market and save it from dipping further.
Mr Wangunyu said Tuesday that the market was greatly affected following the dumping of shares by foreign investors who account for about 78.3 percent of the trading activity on the bourse as of last month.
“The uncertainty of the global (financial) turmoil was most evident amongst the foreign investors as they fled towards the ‘perceived safer’ investment in their home countries. Foreign governments quickly steeped in to salvage their financial markets. Our government should have noted that there should have been interventions from our markets,” he complained.
In December 2007 just before the general election, the NSE 20 Share index closed at a robust 5,444.83 points. Analysts then attributed the trend to the maturity of financial markets.
However, with the post election violence that ensued in January the index dropped by 13.45 percent and its value has since lost about 38.63 percent this year, due to a number of external and internal factors.
The run-away inflation, high cost of food and energy prices and reduced foreign remittances have gradually eroded the disposable income available for investments in the country.
However, despite the poor showing of the market, the performance of listed companies has continued to be solid implying that the firms and market fundamentals are still strong.
“Despite all these challenges, I dvise investors that this is the best time for you to get into the market,” Wangunyu said.
Speaking during the NSE end of year party, the Chairman launched the implied yield bond price list and the resultant market yield curve which will present bond holders with the opportunity to use the same standard to determine the value of their securities’ portfolios.
A key source of market information is the price list and market reports which depict the market activity and the average prices for each listed stock during a particular trading period.
Securities’ markets are made efficient by the availability of accurate and objective information and thus the launch of the curve would enhance the portfolio performance reporting.
“The curve facilitates the marking to market of bonds listed at the NSE. This information is crucial in allowing investors to independently and objectively price their securities,” he explained.
The curve, he added would be dispatched every Friday by the bourse to all persons and institutions in their mailing list.
During the same function, Mr Wangunyu announced that NSE had commissioned the drafting of a Code of Conduct which is meant to bolster the bourse’s membership rules and establish best practice between stockbrokers and their respective clients.
“Our lawyers have now completed the drafting of the Code of Conduct, which will be effective from January 1st next year and shall be binding on all members of the exchange,” he said. The move is aimed at restoring confidence in the market.
Investor confidence has been wanting following the collapse of three brokerage firms in the last one year.
The Chairman took the opportunity to introduce the new NSE Chief Executive Peter Mwangi who will be taking over from Chris Mwebesa beginning January 2008.