Investor caution greets Uhuru’s reopening of economy
Indices reveal a cautious return to the stock market after Uhuru relaxed coronavirus restrictions in a bid to revive an economy that has lost millions of jobs and left banks generally shaken by prospects of mass loan defaults.
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| President Uhuru Kenyatta |
Investors remain leery of the stock market even after President Uhuru Kenyatta’s move on Monday to lift the months-long lockdown on the commercial cities of Nairobi and Mombasa in a bid to revive the economy.
President Kenyatta closed the cities and mostly shut Kenya’s airspace in March after the country started reporting spiking coronavirus cases. Kenyatta took the steps in a bid to curb the spread of the potentially deadly virus.
But the lockdowns created an economic turmoil, with businesses closing down, companies laying off employees and banks scrambling to revise loan terms to help keep borrowers afloat and pausing dividend payments and expansion plans to preserve cash.
The president’s move to lift lockdowns on Nairobi and Mombasa and generally scale back Covid-19 restrictions across the country raised hopes of a quick economic recovery.
Although the easing of Covid-19 restrictions bodes well for the economy and many stocks currently trade at steep discounts that would typically entice bargain hunters, investors remain caution, at least in the stock market.
The NSE All-Share Index that tracks the overall stock market declined 0.55% on Wednesday (July 8). That followed a more than 2% drop on Tuesday. The index fell 1.13% on Monday, the day the president relaxed the Covid-19 restrictions. The index is down more than 19% for the year.
Investors remain cautions even about the blue-chip stocks, which are typically in high demand. The NSE 20-Share Index, which tracks the country’s finest stocks, fell 1.68% on Wednesday. But it rose about 0.30% on Tuesday and 0.16% on Monday. The index, which tracks the performance of blue-chip companies like KCB Group PLC (KCB), Equity Group Holdings Ltd (EQTY) and Safaricom PLC (SCOM), is down 27.6% for the year. Notably, Equity Group and Safaricom shares fell 0.30% and 0.36% on Wednesday, respectively. KCB Group shares dropped 1.16% on Wednesday.
Investors’ cautious return to the stock market despite the lifting of lockdowns reflects concerns about a fluid economic environment. Notably, President Kenyatta said he would restore the lockdowns and generally shut down the country if Covid-19 cases appear to be getting out of control.