[2008-01-07]  Bourse closes prematurely
The Nairobi Stock Exchange closed prematurely on Thursday against a backdrop of thin trading as most stock brokers and investors kept off the city centre fearing violence that loomed following the ban on an opposition rally.

A statement by the NSE compliance manager Andrew Wachira said trading would stop at 11.20am, one hour and 20 minutes after opening.

"Please note that the day’s trading activity at the Nairobi Stock Exchange has been discontinued as from 11.20am for the remainder of the day," read the terse statement.

Chris Mwebesa, the NSE chief executive officer, said that the board had decided to stop trading upon realising that trading would be lean.

Only eight of the 18 licensed stock brokerage houses were open.

"Only about eight stock brokers were accessing our wide area trading platform and the board decided to close after consultations," said Mr Mwebesa.

He promised that the situation would be reviewed this morning based on the security situation. Mr Mwebesa said that the board took the unprecedented step because it could not guarantee the security of its staff or that of the stock brokers.

The only other time that the NSE halted trading in recent history was after the 1998 twin bombings of the US embassies in Nairobi and Dar es Salaam, Tanzania.

On Wednesday, the total equity market valuation shrank by 40 billion shillings as market capitalisation dropped from 851 billion shillings to 811 billion shillings on the first post-election trading day.

Another key stock market indicator, the NSE 20 share index, lost 277.65 points to close at 5 167 points in Wednesday’s trading.

No figures were provided for Thursday’s trading.

Mr Mwebesa said that the ongoing post election violence would obviously have an impact on the stock market but added that such effect could not immediately be established.

"The ongoing political uncertainty has some effect on market fundamentals and some investors may want to sell off their shares while others may want to buy in certain counters and this is likely to affect share prices and the overall market capitalisation," said Mr Mwebesa.

He added that there is still no clear trend yet on which group of investors was driving the market.

Association of Kenya Stockbrokers chairman Mr Jos Konzolo said that the current political stalemate is unprecedented and there was need to safeguard against distortion of market valuations by a few traders.

"If there are too few traders then there are no market makers and the few buyers and sellers could mislead market perceptions," said Mr Konzolo.

He dispelled notions that foreign investors were selling off their shares, saying that the small volumes moved on Wednesday did not reflect foreign investors’ activity.

Some 4,8 million shares valued at 188,2 million shillings were traded on Wednesday.

"Most institutional investors would need to make board decisions to disinvest from the country and this would take time and reflect through huge turnover at the bourse," said Mr Konzolo.

He said that it was normal for the stock market to experience a dip every first quarter of the year as investors sell off their stocks to meet obligations such as payment of school fees.

"Other investors may be liquidating their shares to buy basic items like food as a precaution against the prevailing political uncertainty," said Mr Konzolo.

Most stockbrokers however expressed optimism that the market would stabilise if the current standoff is solved speedily.

"We see the current dip in the stock market as temporary," said Ashbhu Securities CEO Peterson Mwangi. "In fact we expect a rally when the political uncertainty is resolved.
Source: Copyright(c) 2007 The Herald ltd.