Monday, October 22, 2007

The implications on the share Index by the NSE chairman political affiliation

Many have been quick to politicise comments made by ODM Presidential Candidate Raila Odinga about the NSE. They have singularly associated the share index downward trend to his earlier comments on drug money finding its way to NSE also his concerns of share manipulation by a few well connected individuals. Paul Muite the chair of (Departmental Committee on Justice and Legal Affairs) similarly expressed the latter concerns albeit both politicians did not give details.

On Raila Odinga’s comments many have castigated him as an anti-development, alleged he is a communist, thus he would nationalise the listed companies. Others have even argued that he is a propagandist seeking political mileage.

However, many have overlooked the fact that Raila himself owns various private businesses and has strongly argued against his distracter that he has heavily invested at the NSE

Moreover, many people have glossed over others factors likely to be impacting on the downward trend. Such include, investors disposing of share in readiness to safcom IPO and the Christmas festival.

Other reasons as recently pointed by the NSE board are the rising inflation resulting in disposal of stocks so as to buy basic commodities.

Jittery investors holding back in anticipation of the political transition and uncertainty on the direction that the stock market is taking cannot be ruled out either.

One significant but overlooked factor that might also be contributing to the share index downward trend is that of the NSE chairman’s political affiliation and utterances.

Though as a presidential candidate Raila utterances and policies will have an impact on NSE, so too would the utterances and associations that the NSE chairman makes.

It is worth noting that, apart from being the current NSE chairman, Jimnah Mbaru also owes the largest investment bank/stock breakage firm in Kenya. His firm has won very many lucrative contracts from the current government. He is also a member of the presidential national advisory council on socio-economic issues. Also a member of T.C.L an investment clubs whose members are who is who in the current regime. This club has clinched top notch deals within a short period.

Contentiously, the NSE Chairman is also a staunch support of the current regime and is rumoured to be eying a parliamentary seat. He was recently in London with the president daughter and Equity bank CEO vilifying Raila. Not long ago he commented that an O.D.M win at the general election would cause the market to tumble. It is said that he has the regimes eye and ear.

Above issues may be interpreted by investors as resistance to changes likely to be introduced by and ODM government if it comes to power.

Yet it is clear to anybody that has been investing at the NSE that, just like the Capital Market Authority, both are screaming for revolutional transformation from the gentlemen’s club they are, into modern efficient, effective and transparent stock market and regulatory body.

Other investors may foresee a conflictual relationship between NSE (If led by the current chairman) and a future ODM government when the chairman refuses to be politically neutral.

There are also concerns the chairman has not, as was the case in relation to Raila's comments, come out to strongly condemn recent alarmist and false remarks attributed to the finance minister on the NSE losing 200 billion whilst the actual figure was 57billion.

Ironically, the chairman’s has neither come out to reassure anxious investors about the increasingly politicisation of the NSE

From this, one can conclude that the chairman cannot hold onto his seat and at the same time engage in politics without impacting on the share index. Indeed, his stand is a clear conflict of interest. Therefore, the best the chairman can do in reassuring investors is to stick to one role rather than apportioning blame where it is not due.

5 comments:

Ssembonge said...

Before NARC came into power Jimnah Mbaru was widely respected in Kenya. The last few years have seen him transform into a Kibaki youth winger. His pronouncements need to be checked as he is polarizing the market.

MainaT said...

Both gents need to stick to what they know and do best. Raila is a very astute politician (almost as good as M-o-1) and should stick to the same and Jimnah is Kenya's own Warren Buffet and should stick to Stock Echange. I don't know much about aerodynamics, so why would I go opening my mouth in public about it just because a microphone has been thrust at me?

A few corrections/clarifications.

JM, do you know who are the full 29 members of TC i.e. apart from rumours? D&B have always done govt IPOs just have a quick look at their website and you'll see they did KQ, KCB, NBK etc. Are you aware that the NSE is a privately owned business? Nobody but the brokers can fire Jimnah. They'll however be listing in 2008. Jimnah did tell us that whether a horse or a donkey is elected, the inde will hit 7,000 net yr.

MainaT said...

Aren't you guys being abit disgenuous? Jimnah was reacting to remarks such as the "NSE is full of drug dealers" (not true the NSE rose because of customer growth from 50,000 to current circa 700,000) and "we will renationalise all the IPOs" made by the ODM malaika

John Maina said...

His utterrances are not good for the stockmarket and taking sides btwn R.o and kimunya only potrays him as biased, coming all the way to UK just to diss somebody likely to be the next president only put the whole of NSE in conflicts with the future regime yet he is doing so for his personal reasons rather than to protect the market.

MT- some of the prominent guys in TC are also serving in the current government and some are said to be the presidents buddy nothing wrong with that-but there is a report out there on how KPLC and KENGEN shares have been acquired in questionable manner.

With the goodwill it had, NARC could at least have done more in relation to CMA(strong regulatory framework) and indirectly with the NSE.

looking at the context of the 2 comments associated to R.O he was misquoted, similarly to arguements about communism

MainaT said...

JM-sorry, what utterances? If somebody tried to destroy your livelihood, how would you respond?

On TC-please respond to my earlier query.

On Raila (pliz). I was there in September 2006 at SOAS, London when Raila repeated his drug dealers at the NSE allegation and this time ascribed the same to the property boom at home.

CMA needs to be overhauled-true, but then the issue was about NSE Chair's utterances...