Nairobi Securities Exchange trading back to pre-polls level

The Nairobi Securities Exchange (NSE) has witnessed a significant resurgence in trading activity, with turnover surpassing 1 billion shillings on Friday, marking a return to pre-election levels. After a period of subdued investor participation surrounding the election, the market saw a notable increase in turnover, reaching 1.41 billion shillings by the close of trading on Friday. This spike in trading activity signals a positive shift for investors and analysts who have been closely monitoring the market's performance. Caleb Mugendi from Cytonn Investments joined CNBC Africa to provide insights into the market movements in Kenya following the recent election. Mugendi highlighted that many investors had taken strategic positions ahead of the election, and with the peaceful conduct of the election, the market responded positively. The relatively stable environment post-election has encouraged investors to re-engage with the market, resulting in many counters closing in the green and returning to pre-election levels. The market's resilience and bounce-back from the election-related dip have instilled confidence among investors, driving the NSE20 index to 3900 on Friday. Furthermore, Mugendi pointed out that investors were attracted to the Kenyan market due to undervalued assets at the beginning of the year. Despite uncertainties surrounding the election, the market has outperformed expectations, with some sectors showing robust performance. The banking sector, however, may face challenges due to the interest rate cap impacting margins. If upcoming sector reports reveal weaker-than-expected numbers, it could slow down the current market rally. In terms of currency stability, Mugendi commended the Central Bank of Kenya for its efforts in supporting and stabilizing the Kenyan shilling. Despite facing pressure from widening current account deficits, Kenya's currency has remained relatively stable compared to regional peers. The central bank's interventions and reserve buffers have helped mitigate volatility, although maintaining stability may become challenging as import cover decreases. Looking ahead, Mugendi identified the widening current account deficit as a potential risk factor for the Kenyan exchange rate. While export revenues from tea and coffee have provided support, addressing the current account deficit will be crucial to sustain currency stability. As inflation rates have moderated and commodity prices have been favorable, the focus now shifts to managing the current account imbalance to ensure long-term sustainability. Overall, the resurgence of trading activity at the NSE and the positive market performance post-election indicate renewed investor confidence and a promising outlook for the Kenyan market. As the economy navigates through challenges, maintaining stability and addressing structural imbalances will be key priorities for policymakers and market participants.