[2008-09-08]  Inflation, credit crisis and delays to blame for "Bear" market
High inflation, the effects of the credit crisis and a delay in issuing Safaricom Initial Public Offering ( IPO) refunds have been cited as some of the causes of the current market downturn in a survey by stock exchange authorities carried out among stockbrokers.

The Chief Executive of the Nairobi Stock Exchange, Mr Chris Mwebesa, said the survey was undertaken to give an “independent opinion” on the causes of the current “bear” market.

The stock market, as measured by the NSE 20 share index, has been on a gradual descent since June 9, when the Safaricom shares started trading. Since then, the index has lost 15 per cent to close Friday’s session at 4,594 points.

Analysts said increases in the general prices of food and fuel was largely as a result of the high fuel prices which rose in the global markets, also leading to an increase in local pump prices that have shot to above Sh100 a litre.

Adding to the woes in the developed countries was the credit crunch that followed the issuance of home loans to people with little known credit history who defaulted on their repayments in what was known as the Sub-prime mortgage crisis.

Hedge funds and other foreign investors had an eye on the Kenyan stock market but have been exiting to cash in on marginal returns, according to analysts.

“To be down by 15 per cent is not as bad when you compare with other markets especially in the developed world,” said Mr Mwebesa at a function to reward the winners of a university student’s online exchange game. He, however ,expects the market to bottom out soon.

On the competition, judges noted a “high” frequency in trading some of which bordered on excessive.

“I was worried some of them would over trade,” said Justus Agoti, an analyst at Sterling Investment Bank who was also a judge.

“It is good but depending on the portfolio you have. They were turning over fairly cheap shares whose price was less than Sh30” Mr Agoti said.

Frequency of trading accounted for 20 per cent of the score, whereas half the score came from gains made from the seed money. Four students from the University of Nairobi, calling themselves Wizzy Biz investors, were the winners, gaining a return of 12 per cent on their Sh500, 000 seed money, which earned them the top prize of Sh200, 000, courtesy of the NSE.

Bank of Africa awarded the first runner up Sh80, 000 and an offer for four internship places.

Second runners- up who were from the University of Nairobi got four internship offers from Sterling Investment Bank.The competition, organised by Smart Youth Investments, gave students skills of trading in shares at the stock exchange through the Internet.
Source: Business Daily