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Coronavirus Yet to Have Effect on the Bourse: NSE

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Even as the ten-day ban of flights from China by High Court of Kenya effected last Friday enters its fifth day, the Nairobi Securities Exchange (NSE) is yet to be negatively affected.

According to the Chief Executive Officer of the NSE in a recent interview on K24, Mr Geoffrey Odundo,said that notwithstanding the largest capital market in the Eastern African region is standing on its guard.

“ I think that coronavirus certainly is a major concern and the impact that it has on the global economy, not just the global markets. Normally, when there is a major global concern, international investors will sort of hold back. We have not yet seen a direct effect on the local market. We cannot attribute any of the impact on the local market,” he says.

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Mr Odundo, however, says that the Wuhan coronavirus disease 2019 (Covid-2019) has had an effect on global markets since the Chinese economy has a great impact on the world market.

“ The Chinese economy has a lot of co-relation with both developed, marginal and frontier markets like ourselves. So, what has had an effect is that the global market has actually shrunk a bit and we do expect to see a lot of volatility within that regard. Normally, when there is a major global concern, international investors will sort of hold back,” he says.

In the real estate sector, the virus has impacted sales to under 2,000 units, states the Financial Post, citing statistics from Capital Economics.

In China, whose economy is the second largest in the world after the United States of America (U.S.A.) has had its factories closed down due to the Wuhan virus. Because of this effect, a report by American investment bank, Morgan Stanley, has reported that the the Gross Domestic Product (GDP) of China could be reduced by 3.5 percent in the first quarter of this year.

The World Health Organisation (WHO) estimates that people who have died from the Covid-9 virus have reached 3.4 percent.

In China’s Wuhan where the virus emanated from, there were 1, 696 people who had died from the virus.

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Researchers from the University of Southampton have already singled out Nairobi, the capital city of Kenya, as being the sixth most vulnerable city in Africa to have the Wuhan virus.

Nevertheless, Mr Odundo says that Kenya cannot ignore the effect of the global market as it has been affected by the occurrences in the global financial markets between 2019 and 2020.

“70 percent of the NSE’s market is mainly foreign. So, last year we closed slightly higher on the global front tends to have an effect on the local market. Mostly it is because of the continuous global challenges that we continue to face. At the close of last year, we performed slightly below our expectations from on the equity trading from Kshs 1.75 billion turnover to Kshs 1.53 billion, while our bond market was actually higher from Kshs 585 billion to Kshs 651 billion, so we had a sort of re-balancing there,” he says.

Justice James Makau of the High Court, who issued the 10-day ban of flights from China, specifically from China Southern Airlines coming from China to Kenya, found the argument forwarded by two doctors and a Kenyan lawyer, to be justified as it was on grounded by a global advisory by the WHO to curb spread of the virus.

Mr Odundo says that, overall, the NSE continues to have a greater impact, as has been witnessed by its growth in market capitalisation.

“Today, our market cap is 2.62 trillion shillings. Today, we have a lot of large companies as compared to previously when we had fewer companies. So the market has largely grown. We have 65 companies. In the last one week, we have had a significant trade of volumes in the last one week. On Friday alone, we saw well over 800 million along in trading. So, despite the global challenges, there is still a large amount of interest,” he says.

The NSE equity market has different sectors such as agricultural, construction and allied, banking, automobiles, insurance, investment and commercial services.

Its CEO, Mr Odundo, whose contract was last year extended for the next four year until 2024, starting March 1, further says that the NSE has been been recording a profitable growth because of investors.

“What is happening now is that it is a profit trading this year because the investors who bought last year, the market did appreciate, so they are more or less balancing their books and taking profit and as new funds are coming in we are re-injecting into the market,” he says.

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