Friday, August 25, 2006

NSE Bull Run: Kenya's deja vu?

At the begining of 2003 after the Narc team took over power several economic indicators showed a positive outlook with the most visible being the bull run at the NSE. several reasons could be advanced for the bull run chief among them being that the govt reduced the cash ratio for the banks and financial institutions from 8 to 6 % thereby releasing billions into the market.

The banks did not know immediately what to do with the money in a country where inovation is a foreign word. since banks were used to conservative ways of making money namely loaning the government, the excess liquidity ended up in the nse. This led to the unprecdented bull run. with people investing without looking at the fundamentals at all. even companies which had not paid any dividend for years saw their prices appreciate. industry observers and analysts were left baffled.

We thought the bul run would ease off due to market correction but again something else came up. The 'perculiar' nature of kenyans. Kenyans always go with the crowd. they will always go where other kenyans are without asking why.

We saw when the hype started that NSE was the place to make quick bucks, people rushed there. it reminded me of the old days when people were buying plots and puting up houses without regard to whether or not there were any returns. when the plot run subsided, there came the rush for 'exhibition halls' people paid upwards of 1 million shilings as 'good will' for a 6 by 6 room and as much as 30,000 rent for the same. whether or not they made money is debatable. then came the matatu craze and many others

Right now the issue is that there is money in the NSE and everybody is angling for a share. people even pulled out of the time tested SACCOs to invest in mutual funds. some took loans to service the share purchases etc. however the ones who have been laughing all the way are the brokers who gain either way.

to understand therefore whether or not this bull run will continue, all you have to do is study all these trends. the prices will keep on their eratic movements as long as kenyans look for quick gains in the stock exchange.


  1. Odegle, Kenyans are at it again, moving form merry-go-round to investment clubs. I wonder what next!
    I have a feeling that very soon most Kenyans will realise that the bourse has very high risks and its not the place to make overnight kill,they'll soon back-off.

  2. You said it! I can see the time coming very soon in fact the problem is that a new scheme hasnt hatched yet. I was shocked to see stock brokers encouraging kenyans to take loans for such extremely risky ventures.

  3. Odegle, your blog is moto, all you need to do is popularise it. Sawa?


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