Coronavirus fears: Investors lose big at NSE

Friday, February 28th, 2020 15:33 | By

John Otini

Investors at the Nairobi Securities Exchange last week lost billions of shillings as foreign investors dumped stocks on fears that coronavirus may force a stagnation on the world economy.

KCB, Absa(formerly Barclays), Cooperative Bank among other stocks faced fresh selling on Friday for the fifth straight day as investors sought shelter in asset classes that are seen as safe during economic storms.

The NSE fell 4.6 percent in less than a week with analysts attributing the sell-off to a flight to safety where investors pile their money into government bonds, gold and US dollar during times of uncertainty.

“Global markets this week were infected virulently by the Coronavirus. The negative spillover has hit Africa now and specifically the ''pull'' effect of the China Africa engagement is now in reverse,” said analyst Aly Khan Satchu.

Excluding Safaricom the NSE was already back at 2002 levels and therefore there is a counterintuitive argument that the coming takeout might not be as brutal but I for one think that is deluded, AlyKhan said.

This is happening despite the fact that it is an earnings announcement period when shareholders expect dividend payouts especially from the banking sector stocks.

“The market should be warming up to earning reports between now and May, but instead we are seeing heavy selling,” said Michael Mwakio, a trader at Suntra Investment Bank.

More than half of the activities on the exchange are due to foreign investor dealing.

Companies are more exposed to the epidemic because China is major player in the global supply chain with many raw materials coming from the Asian giant.

This trend has seen the drop in prices of stocks across the globe; the Dow Jones in Wall Street has dropped 4.4 percent in a single day closing, The Nasdaq Composite by 4.6 percent and S&P 500 by 4.4 percent.

Global equities have been selling off around the globe as investors fret about the spread of the virus, and the NSE has not been left out.

“It happens every time investors feel the need to play safe. They sell stocks and buy US treasury bills and gold,” Gerald Muriki, a stock analyst at Genghis Capital was quoted saying on a phone call.

Patrick Mumo of Genghis said ”Coronavirus is making things bad for business, with international investors pulling out, the panic might cause a major shock in the stock markets.”

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