Joseph Bonyo
11 January 2010
Nairobi — The Nairobi Stock Exchange might have a better run this year compared to last year's pitiable performance. According to analysts from CFC Stanbic Financial Services, the bourse is expected to reap from among others, the expectation of a global and local economic recovery.
A knock-on effect from the 2010 Fifa World Cup, as well as a slowdown on shocks experienced by the economy compared to the last two years, should also boost the market.
"We are optimistic that the equities on the NSE will deliver positive returns this year," said the analysts. In 2009, the market had to contend with a lack of investor confidence and the ripple effects of the global economic downturn.
Other positive indicators analysts are banking on include increased interests from foreign investors and reduced perceived political risks this year. However, the political risk factor is highly anchored on the constitutional referendum scheduled for May, and the international prosecution of post-election violence suspects.
In the first week of trading, the NSE shored up its performance, closing at 3304 points, a 1.7 per cent rise from its December 2009 closing. According to statistics, local investor participation was 68 per cent compared to that of foreign investors, which accounted for only 32 per cent of the total trade during the week.
"While we are not saying that it's going to be an easy walk, several sectors appear to have positives going for them at least, based on broad trends," the analysis adds. Within the sectors, beverage and tobacco companies could benefit from additional revenues from foreign markets. But this could also be dampened by high input costs in the industry.
Media and publishing counters are also expected to have a better run from the declining prices of newsprint, as well as a possibility of companies increasing their advertising spend on an improved economy. Stocks in travel and leisure, information communication and technology (ICT) are also expected to reap from the World Cup tournament in South Africa, as well as the landing of the fibre optic cable.