Kenya stocks seen rebounding in 2010, politics eyed
The Nairobi Stock Exchange's main share-index shed 7.8 percent [04.01.2010]
By George Obulutsa
NAIROBI (Reuters) - Kenya's stock market is seen rebounding this year after falling in 2009, due to improved rainfall and macroeconomic conditions, although politics will remain a major concern, analysts said on Monday.
The Nairobi Stock Exchange's main share-index shed 7.8 percent to close at 3,247.44 points in 2009, while turnover dropped by 61 percent to 38 billion shillings.
Activity is seen improving this year, helped by favourable weather which is expected to boost food production and in turn lead to lower inflation, as well as improved hydro-electricity supply.
Last year Kenya's Meteorological Department said the country was likely to receive heavy rainfall during the wet season starting in October, which would bring relief to Kenya's parched farmlands and replenish its hydroelectric dams.
"In Kenya rain is not just for food. It will affect agriculture, it will affect the cost of energy," said Stephen Gugu, investment analyst at Stanbic Investments.
"We see the macroeconomic environment getting better because of the rainfall. In that case, things should look much better than they did in 2009."
Analysts attribute last year's stock exchange performance to the global financial crisis, which led many foreign investors to exit the bourse.
Their return is seen boosting the exchange, whose capitalisation dropped to 834 billion shillings at the close of 2009 from 853 billion shillings a year before.
"We are positive on the market. One big factor would be the return of the foreign investor to the market," said an assistant investment analyst at Sterling Investment Bank.
The market will be watching Kenya's coalition politics, especially plans for a new constitution and the eviction of settler families from the Mau Forest, a vital rainfall catchment area in the Rift Valley region.
The relocation of about 20,000 families from the Mau Forest has split Kenya's already fragile coalition government, which was formed in 2008 to end post-election violence that killed at least 1,300 people and displaced another 300,000 from their homes.
Kenyans are due to hold a referendum to decide on a new constitution -- seen by some as a tool to limit state powers and guarantee equitable distribution of resources.
"If the ... the political situation doesn't get worse, then our view is that 2010 should see the equities market pick up," Gugu said.
Investors are expected to take advantage of conditions in 2010 ahead of politicking for elections in east Africa's largest economy, due in 2012.
"We are looking at ... 2010 (as) the only year that investors would want to reap maximum from the markets because as we head to ... 2012, probably politics will play a role in dampening stocks," the analyst at Sterling Investment said.
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