Coronavirus wipes Sh28b out of Securities Exchange
Zachary Ochuodho @zachuodho
There was slight improvement in share prices of some counters at the Nairobi Securities Exchange (NSE), a day after the bourse was reported to shed Sh573 billion in paper money due to the impact of coronavirus.
Yesterday, the bourse shed about Sh27.9 billion. But while some counters improved, others continued to experience the downward trend.
Local investors took up positions accounting for 49.4 per cent of market activity.
Equity turnover stood at Sh1.5 billion compared to a previous Sh1.2 billion as market capitalisation stabilized at Sh2 trillion.
The bourse was forced to temporarily close the market for 30 minutes last Friday when nearly all the counters experienced downward trajectory wiping off more than Sh200 billion in paper cash.
However, come Monday and some counters, including Safaricom, Sanlam, Uchumi, Absa, Britam, DTB, Eveready, Home Africa, I&M Longhorn Publishers and Scan Group improved in comparison to their Friday’s performance.
The development came as investment experts admitted that the virus could have between a 10 to 25 per cent impact on Kenya’s gross domestic product growth this year.
Cytonn Investments research analyst Beatrice Mwangi says the 10 per cent impact is an optimistic forecast in the event the outbreak is contained, while a 25 per cent impact is in the event it is not dealt with.
Economic implication
“As such, the Coronavirus could reduce Kenya’s GDP growth to a range of 4.3 per cent to 5.2 per cent in 2020 depending on the severity of the outbreak and economic implications for Kenya,” she said.
Sterling Capital’s John Kirimi says the sudden drop in shares by five per cent or more on Friday necessitated “halting” the market to give traders time to rethink their strategy.
He says when things go south; the market needs a circuit breaker.
The cause of the decline is the panic selling of shares by traders fearing that the worst was still ahead of them.
“It is human nature to panic. If you can remove panic from human beings, then you can avoid shutdowns in stock market midstream during trading. In other words, it will always happen when panic sets in among stock traders,” he says.
The equities market was on a downward trajectory on Friday last week, with NASI, NSE 20 and NSE 25 losing traction by 14.4, 11.5 and 13.9 per cent respectively, hitting losses of 19.7, 20 and 18.6 per cent, respectively.
The loss recorded by NSE 20 breaches the threshold of a bear market, which is a condition in which securities price falls by 20 per cent or more.
NSE chief executive Geoffrey Odundo says the sell-off intensified on Friday when the market shed Sh120 billion, prompting the bourse to halt trading midway through the carnage.
NSE provisions contained in rule 9.4.1 (ii) of the NSE Equity Trading Rules says that when the NSE 20 Share Index decreases by more than five per cent at the opening session compared to its closing value or during the continuous session, compared to its opening value, the exchange may temporarily halt trading for not more than 30 minutes.
NSE, therefore, notified market participants, investors, key stakeholders and the general public that trading at the NSE was halted on Friday 13, March 2020 at 2:38 pm as per the provisions.
