Sunday, July 10, 2011

NSE: Observe its cycle

With the exception of the pre-multiparty years and the first Baba Jimmy era (as an aside I'm totally convinved that Baby Jimmy was told he'd be the 1st president never to have done 2 terms and he ahd to do 2 terms irrespective hence PEV), the NSE has always follows the same pattern. As soon as a General Election is concluded, investors of every hue and persuasion flood in. For the next 4 years and despite several ups, the NSE index maintains an upward trajectory. Then investors and their volumes flee the market in the year of general election.

Why is this and why was 2002-7 period the exception?

Quite simply because, despite a 40m population (60% barely plugged into the economy), we still eat, walk and sleep politics. In Kenya, good politics=good economy and not vice versa as you'd find in most developed countries. In 2007, Kenyans thought it'd be a walkover for Raila and as such everybody kept their money in the NSE or were too pre-occupied with the NSE bullrun.
Given PEV at the start of this 2008-12 political term and consequent political; the ongoing rain short-fall; the out of his depth CBK governor; relatively high oil prices, cycle will be followed to the t.


Ssembonge said...

What does this portend for real estate prices. There was a major slump prior to 2002 elections.

kathuri said...

CORRECTION PLEASE!!!!!The reason why the market was more stable prior to 2007 elections than now the true investors of Nse Knew Kibaki was going to win hence had faith in the Mkt right now the top contender of the 2012 election doesnt encourage much confidence in addition the hague business muddies the political forecast making a very uncertain outlook for the next 1 year.A better picture will emerge after september hague hearings

MainaT said...

Ssembonge-picture is mixed. The upside factors are lack of any other investment outlets now that NSE is going bearish and the continued unmet demand for housing. The negatives are likely continued rise in interest rates; politics and if we get an jackass in 2013.
Kathiru-no political angle was intended in the post.