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Uncertainty expected to hit markets, report indicates

By Steve Umidha
Tuesday, September 14th, 2021 00:00 | 2 mins read
Nairobi Securities Exchange. Photo/PD/FILE

Uncertainty being witnessed in the stock markets is expected to continue for a while, industry trends indicate.

Investment firm Genghis Capital says while the market was vibrant during the week as the Nairobi All Share Index and the NSE-20 Share Index surged by 0.4 per cent and 1.9 per cent week-on-week respectively, analysts at the firm feel it may not hold.

The major risks going forward includes the next presidential election which has in the past been marred with violence, ongoing vaccination campaigns and the extent of the next short rains.

“We expect the uncertainty-led slowdown in the equities market to persist, offering investors the chance to accumulate strong undervalued risk assets in the market,” noted Genghis in its weekly report.

During the week, the markets’ turnover grew marginally by 0.9 per cent week–on–week, to settle at Sh2 billion.

Cytonn Investment’s weekly review says last week’s equities market performance was mainly driven by gains recorded by large-cap stocks such as Equity Group, NCBA Group and Safaricom, which gained by 2.2%, 1.7% and 0.8%, respectively.

Gains and loses

“The gains were however weighed down by losses recorded by banking stocks such as Diamond Trust Bank (DTB-K) and ABSA Bank which declined by 1.5% and 1.4%, respectively,” noted analysts at Cytonn Investments.

Markets rely on good news and certainty, however, bad news and uncertainty seeming to be the dish of the day currently even in most developed.

This generally affects investment decisions, consumption, production and employment.

During the week, the Insurance Regulatory Authority (IRA), released the Q2’2021 Insurance Industry Report highlighting that the industry’s gross premiums rose by 19.0% to Sh144 billion in Q2’2021, from Sh121 billion recorded in Q2’2020.

Markets rely on good news and certainty, however, bad news and uncertainty seem to be the dish of the day currently even in most developed countries.

This generally affects investment decisions, consumption, production and employment.

Shedding jobs

Kenya National Bureau of Statistics (KNBS) estimated in the Economic Survey 2020 that the economy shed an estimated 738,000 jobs out of which 544,000 were from the informal and 194,000 from the formal sector.

The informal sector workers from the wholesale and retail trade, hotels as well as in the restaurants took the hardest knock from the pandemic.

However, the economy is expected to accelerate fastest this year on relaxed restrictions as well as government’s relentless efforts to vaccinate more citizens against the Coronavirus.

Treasury estimates that the economy will rebound strongly in 2021. Whereas the estimated 0.6 per cent growth in 2020 falls below the 5.4 per cent in 2019, it was a better outcome compared to Kenya’s peers like South Africa and Nigerian economies which contracted by 7.0 per cent and 1.8 per cent, respectively, while SSA thinned by 1.9 per cent in 2020.

Steve Umidha