In a dramatic turn of events, the Nairobi Securities Exchange (NSE) has staged a significant rebound, recovering Sh15.7 billion in market value following a turbulent start to the week. The NSE All-Share Index, a key indicator of market performance, gained 1.01 points, or roughly 1%, on Tuesday, ending the day at a robust Sh1.595 trillion in market capitalisation.

This resurgence came after a substantial drop in market value on Monday, when the NSE lost Sh33 billion as global uncertainties triggered a rush of foreign investors fleeing the market. The selloff was part of a larger global trend, driven by fears of a looming recession in the United States and signs of financial instability in Japan, which had a ripple effect across international markets.

On Monday, the NSE experienced significant declines, particularly affecting major stocks like Safaricom and BAT Kenya, which are among the most widely traded and closely watched on the exchange. The global panic was palpable, with markets across Asia, Europe, and the Americas reacting sharply to the news of economic troubles and financial instability.

However, the market’s mood improved on Tuesday, mirroring a broader rebound in international equities. In Japan, the Nikkei 225 index made a remarkable recovery, soaring 10.2% after suffering a staggering 12.4% drop the previous day—the index’s worst day since 1987. This bounce-back was fueled by a combination of factors, including calming investor nerves and strategic buying opportunities emerging after the steep declines.

Similarly, the American S&P 500 index, which had fallen by 3% on Monday, edged up by 0.3% on Tuesday as markets attempted to stabilize. The global financial landscape, characterized by uncertainty, was significantly impacted by a grim US labor market report released on August 2, which suggested that the world’s largest economy might be inching closer to a recession.

Adding to the global volatility was a recent decision by the Bank of Japan to raise interest rates. This move put considerable pressure on a popular trade strategy that involves selling the yen and buying the dollar. The increased rates contributed to a sharp depreciation of the yen, exacerbating the financial turbulence and affecting markets worldwide.

In Nairobi, the aftermath of this global upheaval was particularly harsh on some of Kenya’s largest and most prominent stocks. Safaricom, the NSE’s largest company by market capitalisation, saw its shares plummet by 4.3% on Monday. However, the stock made a notable recovery with a 3.1% gain in Tuesday’s trading, reflecting a renewed confidence among investors.

Other major Kenyan stocks, including Equity Group, East African Breweries Limited (EABL), and KCB Group, also experienced fluctuations. These companies are part of global indices like the Morgan Stanley Capital International (MSCI) Kenya Index and the Financial Times Stock Exchange (FTSE) Russell Index, which attract significant foreign investment. The high visibility of these stocks among international investors often leads to pronounced impacts when global market conditions shift.

In the second quarter of 2024, foreign investors had shown a positive sentiment towards the Kenyan market, making net purchases amounting to Sh2.78 billion. This was a rebound from the net sales of Sh2.23 billion recorded in the first quarter of the year, demonstrating a cautious optimism that had buoyed the market. The recent volatility, however, has cast a shadow over this trend, highlighting the sensitivity of Kenya’s market to global economic shifts.

The recovery of the NSE, therefore, is a welcome development, suggesting that investor sentiment is beginning to stabilize. Despite the recent challenges, the market’s ability to bounce back reflects a resilient and adaptive financial environment, which could help buffer against ongoing global uncertainties.

As the world watches closely, the Nairobi Securities Exchange’s performance will continue to be a critical indicator of how regional markets react to broader economic trends. The fluctuations in Kenya’s stock market are not just a reflection of local investor sentiment but also a barometer of global financial health, illustrating the interconnected nature of today’s economic landscape.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

8th August, 2024