The Nairobi Securities Exchange(NSE) recorded a loss of KSh 92 billion on February 24th, 2022, following Russia’s invasion of Ukraine.
This is the most significant loss that NSE has made since March 2020, when the Covid Pandemic first struck.
In the recent past, foreign investors have been withdrawing from the market due to the uncertainties associated with the upcoming elections.
The withdrawal of the blue-chip stock, which are common with foreign investors, has pushed the bourse further down to a seven-month low.
Other Exchanges across Africa have also been affected. For instance, Johannesburg Stock Exchange All-Share index recorded a drop of 3.7 per cent, Egypt Stock Exchange’s EGX100 index was down by 7.3 per cent, and the Nigeria Stock Exchange declined by 0.1 per cent.
The latest Capital Markets Soundness Report (CMSR) Volume XXII mentions that with Russia’s invasion of Ukraine, coupled with the politics ahead of the August 2022 elections, the risk of volatility in the NSE indices remains a crucial concern on market stability.
Wyckliffe Shamiah, Chief Executive of Capital Markets Authority(CMA), said that the Russian-Ukraine crisis has injected shocks to the world economy with spillover effects witnessed in other economies, manifested mainly through commodity price hikes, impacting both monetary and fiscal policy decisions for Governments.
“Before the outbreak of the crisis, most key global macroeconomic variables were seen as returning to normalcy with the hope of resumption to pre-pandemic levels.
This was mainly anchored on the fact that Russia and Ukraine are large producers and exporters of essential food items, minerals and energy across the globe,” said Shamiah.
This, coupled with pandemic induced global supply chain challenges, has resulted in sizeable economic and financial shocks, particularly in commodity markets, with the prices of oil, gas and wheat soaring.
On market performance, the Kenyan capital markets recorded mixed fortunes in the soundness indicators during the Q1, 2022 period under review.
“Average foreign trading in the equity market was 54.88%, down from 57.73% recorded in the previous quarter. A net equity outflow of KSh 1.69 billion was recorded in the same period, an improvement, compared to an outflow of KSh 5.32 billion, in spite of the impact of the Russian invasion to Ukraine during the quarter,” said Luke E. Ombara, CMA Director for Policy and Market Development.
The turnover ratio averaged 0.35%, down from 0.46% recorded in the previous quarter, signalling persistently low liquidity levels.
“Despite a relatively volatile macroeconomic environment, we continue to encourage increased investment in the domestic market by both institutional and retail investors as the success of our markets greatly depends on our involvement across all asset classes,” said Ombara.