By JAMES ANYANZWA

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Investors on the Nairobi Securities Exchange (NSE) counted Ksh4.2 billion ($29.78 million) paper losses on their equity investments as a bear run hit the market a day after a countrywide anti-government protests over the high cost of living, reversing the Ksh10 billion ($70.92 million) gain made on the day of the demos.

Analysts described the market rally on the day of the protest as “unsustainable.”

NSE data shows that the market capitalisation declined by 0.23 percent ($29.78 million) to Ksh1.778 trillion ($12.6 billion) on Thursday, from Ksh1.782 trillion ($12.63 billion) on Wednesday, the day of the protests.

Equity turnover declined to Ksh107.22 million ($760,425.53) from Ksh331.13 million ($2.34 million), while total equity deals fell to 1,055 from 1,198.

The number of shares traded declined to 6,040,400 from 13, 446, 800, with the NSE All Share Index declining by 0.27 points to close at 114.20

But the NSE 20 Share Index grew by 7.24 points to close at 1627.3. The stock market had shown resilience in the face of the protests on Wednesday, buoyed by increased returns on government bonds and positive sentiment about the slowing of the US inflation, signalling the possible onset of low interest rate in global economies.

Read: Foreign investors activity at NSE dips

Several firms in banking, automobile and accessories, commercial and services and energy and petroleum sectors posted marginal increases on their stock prices.

On the other hand, share prices of firms in the insurance, agriculture, manufacturing and telecommunication sectors remained unchanged while those in the investment sector posted marginal losses on their stock prices.

“We are beginning to see a little bit of activity on the stock market, which is indicating that we are anticipating getting to the bottom of the cycle and prices begin to go up. That is the key driver of the market,” said Paul Mwai, NSE’s Vice Chairman and Chief Executive of AIB-AXIS Capital Ltd.

“ I think US inflation has started coming down which is a signal that the Fed could stop increasing interest rates and gradually begin to bring it down . That would mean investors (foreign) would start coming back to our markets.”

According to Mr Mwai, institutional investors are shifting funds to treasury bonds to take advantage of the high interest rates as the government looks for money to finance its operations.

High NetWorth investors are taking advantage of the prevailing low share price at the exchange to buying stocks with a long-term view.

“For institutional clients, they are buying bonds because of the higher returns as a result of the government’s appetite for debt while on the other hand we are getting a lot of retail activity from high-net-worth local investors saying that this is the time to buy shares. But the volumes are not also very significant,” Mr Mwai said.

Read: Kenya seeks to avert potential investor crisis

“We have seen a bit of rally in the market but with very low volumes so I can’t say it is sustainable.”

On July 12, the US Labour Department reported the overall inflation for the month of June declined to three percent from four percent in May, indicating that the Federal Reserve’s aggressive rate hikes has started bearing fruits.

US inflation had hit a 40-year high of 9.1 percent in June 2022, before declining for 12 consecutive months.

The Fed has raised rates 10 times since March 2022 increasing its funds rate by a total of five percentage points to between five and 5.25 percent in May this year.

NSE investors are keenly factoring in the developments in the international financial markets in respect to inflation and interest rates, despite the political instability in the local environment.

Read: Ruto seeks to assure investors after demos

“The stock exchange has to some extend learnt to be a little resilient to demonstrations over time, but I think more importantly the key thing we are looking for is the interest rates to start coming down in the international markets,” Mr Mwai said.