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Investor Confidence fuels NSE rebirth |
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In less than a decade, the stock market has oscillated between an all time-time high frenzy of activity to muted performance when matters political have had negative impact. Now, though, activity is lively at the bourse as the effects of the post-election crisis wear off and the economy looks up. |
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The incredible performance of the Nairobi Stock Exchange (NSE) was the talk of the country from 2002-2007.
The main NSE index rose 787 percent in dollars according to standard & poor’s the investment research firm; making it one of the world’s best performing markets then.
However, these gains were reversed after the post-election violence in Kenya which had a bruising effect on Kenyan economy and inevitably affecting the stock market.
The NSE resurgence has now begun as of 2010. The economy is beginning to rise again and experts predict that the economy will rise by up to four per cent in 2010. Kenyans are also now beginning to have more confidence in brokerage firms and have• a better attitude towards investments after the Capital Markets Authority.
The Kenyan Stock Exchange has now taken a needed reform and the Kenyan boom is back and heading towards the bubble stage, this is evident with the significant rise in most counters in the NSE as of 2009-2010.
The market has picked up gradually, but consistently after a decline that was partly attributable to structural issues specific to the Kenya market such as inflation which reduced the proportion of income that could be put aside for investments and savings.
Investor sentiment is more positive as the economic and market outlook improves. This is reflected in the gains made by the NSE 20 share index
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Also notable is the shift from equity to the relative safety of fixed income Securities with institutional and high net worth retail investors investing in Government of Kenya debt ostensibly to conserve and protect wealth.
Foreign investors have made a remarkable comeback to the stock market, to tap the attractive opportunities discernible by sophisticated investors.
Clearly, the capital markets industry in Kenya today has more than any other industry experienced a complete metamorphosis in the last year or so.
Admittedly, there have been disappointments in the not distant past on various malpractices ranging from poor management to outright lack of confidence in the manner in which stockbrokerages run their businesses.
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Corporate Governance and Code of Ethics |
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A quick run through the internal checks and balances that stockbrokers have domesticated in the recent past will testify to this. After the realisation that there was a need to improve the internal governance structures of stockbrokers and investment banks, Kenya Association of Stockbrokers and Investment Banks (KASIB) took its members through comprehensive corporate governance training and launched the code of ethics.
This document governs the manner by which stockbrokers ran their businesses.
It is a complete, guiding, and thorough document that the investing public can use to police the stockbrokers and investment banks.
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Publication of results |
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That stockbrokers and investment banks wholeheartedly embrace the call to publish their financial results, not once but twice and not in one, but two papers of national circulation has won the confidence of many an investor, both local and foreign.
According to the KASIB chief executive, Jane Njeru, an open door policy to complaints from investors and the immediate action consequently taken has truly uplifted the investor confidence in the stock market today.
Other players in the capital markets industry have also made very commendable efforts that have contributed a great deal to the re-birth of the industry.
The NSE has set up the Complaints Handling Unit, a unit they launched together in 2009 which receives complaints from the investing public.
The Capital Markets Authority has set up the anti-fraud unit that investors believe has the requisite competence to unearth fraud in the Capital Markets Industry.
And the Central Depository and Settlements Corporation has set up one of the best and most reliable depository systems that guarantee the safety of investments in the market.
The Capital Markets industry is integral in the growth of any economy and its performance is an indicator of the overall performance of an economy.
KASIB has among its midterm and long-term goals, efforts aimed at ensuring that the market shall become the market of choice in the African continent.
The wholehearted embrace that stockbrokers and investment banks have with regard to introducing principles of good corporate governance in the manner they ran their businesses has won praise from friends and foes alike.
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The NSE resurgence has now begun as of 2010. The economy is beginning to rise again and experts predict that the economy will rise by up to 4 percent in 2010.
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