NAIROBI, Kenya, Jan 6 – As increased optimism in the growth of the Kenyan economy continues to rise, investment analysts are forecasting that the Nairobi Stock Exchange (NSE) will continue to remain vibrant with the 20 share index expected to reach the 6000 points mark.
NSE Second Vice Chairman Job Kihumba in an exclusive interview with Capital Business contended that given the good performance of listed companies supported by an expanding economy, the index which tracks the performance of the top 20 counters at the bourse will revert back to the historic levels witnessed in 2007.
"In my view, it is not difficult to get back to 6000 points before the end of this year. Listed companies are doing extremely well and the results that we expect for the end of December 2010 will probably be the best ever," he said.
Buoyed by a booming economy and a general increase in confidence levels, the benchmark index touched a high of 6200 points back in 2007 but this was eroded in coming months and declined further down after the events that followed the 2007 presidential vote.
Economic recovery over the last two years has however seen a steady rise in share prices and higher volumes as reflected in the share index which closed the year (December 2010) at 4432.60 points having opened at 3247.44.
Robust growth in both the equities and bond markets which in 2010 saw turnover rise by 135 percent to Sh89 billion and 330 percent to Sh476 billion respectively also served to raise the profile of the bourse, which outperformed all exchanges in Africa.
Going forward, a peaceful vote in Southern Sudan to determine whether to split the country into two is another factor that is set to boost not only the performance of the local exchange but that of the Kenyan economy in general.
Kenya has several listed companies that have set up shops in Southern Sudan while an estimated 100,000 individuals operate small businesses there.
Firms such as the Kenya Commercial Bank Group, Equity Bank that entered the northern African country in the last few years have been posting good returns and with a successful and peaceful referendum, these figures are expected to soar.
"Equity Bank for example saw some of their branches break even within one and a half months and this is amazing because normally it takes up to two years for an outlet to break even and therefore these companies are likely to make more money," Mr Kihumba pointed out, adding that this would certainly be reflected in the performance of listed firms\’ counters on the NSE.
While an influx of Kenyans companies to the virgin and oil-rich country is expected, the NSE is also on the lookout and ready for Sudanese firms that would want to list on the bourse.
"If that country becomes stable, you can be sure that Southern Sudanese will grow very first and some of them will come here to look for capital for further development, other will look for expertise, which Kenya is endowed with so we can expect a lot of interactions," Mr Kihumba predicted.
But while the outlook for NSE remains positive, there are fears that political \’noise\’ that might be generated from the approaching 2012 general election campaigns might cause jitters in the market.
Mr Kihumba however downplayed the effect of the anticipated political realignments and \’temperatures\’ on the economy and the stock market saying the impact would only be felt if there are major disruptions as happened in 2008.
"Politics is always with us and as we head towards 2012; that is likely to generate heat but provided there\’s peace and there is not much disruption, we should not expect much of a problem," he emphasised.
And while the country is faced with the risk of a prolonged dry spell, he reckoned that the government is somewhat prepared to deal with this threat.