People are losing millions on the Nairobi stock exchange. Fortunes are being literally wiped out overnight.
Initially brokers and officials at the stock exchange put up a brave face and peddled the spin that what was happening was a simple "correction" of the market. It has long become clear that this is much more than a simple correction.
But what has triggered it off? How will it affect the much-anticipated Safaricom IPO? Will the market really crash? Those are the anxious questions many Kenyans are asking.
This is in fact a perfect example of how the Kibaki administration has taken only a crisis management approach to everything rather than trying to nip problems in the bud before they happen. When indications of massive flows of capital started happening shortly after the general elections on December 2002, nobody in government seems to have been bothered. In fact they were ecstatic. Yet we all know that the simple law of gravity applies to the stock market the world over. That is what ever goes up must come down and the more rapidly and higher it goes up the harder and more damaging the inevitable fall will be.
It is now emerging that whatever other factors that have been mentioned, the main one is that the heavy cash investment in the stock exchange had to do with politics. Here there are two possibilities. Firstly that the money was corruption money invested in the stock exchange in preparation for the 2007 elections and which has now been rapidly liquidated for that purpose.
However the second and much more likely scenario is that some heavy investors suddenly cashed in on their profits because they expected the market to lose momentum as the general elections approach. The same people will then re-invest in the bourse when prices hit rock bottom at around the time the general elections will be happening and end up making another tidy windfall profit.
Whether or not you agree with my thesis, the fact remains that shares at the NSE are coming down and coming down too fast. And the really scary thing is that most analysts agree that the bottom is very far down and yet to be reached.
A Little creativity made Kenyan man $1,000 in daily profits
This woman has never heard sex, the reason will shock you.
These investments always have some inherent element of risk, so I suggest that "if you can't take the heat get out of the kitchen" i.e. cut your losses and run
ReplyDeleteChris,
ReplyDeleteLet us assess the capital markets properly. In recent history ,i.e. post Kengen IPO where the general public was sensitized enough until they became the investing public, there has been a dramatical increase in the price of shares. This is mainly not founded on the company fundamentals, mainly on sentiment and short term speculation.
I can tell you for a fact that the market prices that were there say, in november 2006 were a total misrepresentation of the intrinsic value. The excess liquidity experienced in the recent past can be identified as a major cause of this. Also, the CMA is basically sleeping on the job. How the hell can Francis Thou and Co. Ltd. sell off a person's shares without express authority?
As share prices are based on sentimentality, they are bound to go lower. Many financial analysts have embroiled in arguments whether the prices are overvalued or not. In my informed opinion, given various emperical studies, many shares were overvalued as at Nov 2006. Consequently, the current downward trend is merely a price correction.
This being an open market any ups or downs should not be attributed to political overtones or undertones. As in any business venture the investor should undertake a risk analysis and come to a decision, the stock market has been driven a lot - as mentioned by Ngunjiri - based on sentimentality which of course will lead to people either making a fortune (at which time no one complains) or making a loss. Remember high risk high return but also high loss if it goes against your bet
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