The Nairobi Securities Exchange (NSE) and the shilling swung back into positive territory yesterday after the US announced a 90-day pause on reciprocal import tariffs above 10 percent, easing the jitters that had sent global markets into a near meltdown since Friday.
NSE data shows that the bourse added Sh34 billion in market capitalisation -- the measure of investor wealth -- yesterday, clawing back nearly a third of the losses of Sh124.4 billion that it recorded between Monday and Wednesday.
The shilling also made gains on the dollar in the forex market after demand for the US currency by investors looking to exit the local market eased.
The currency traded at an average of Sh129.42 to the dollar by 4 p.m. yesterday, having strengthened from Wednesday’s closing average of Sh129.67.
A market trader quoted by news agency Reuters said that due to the tariffs, some offshore companies were exiting the market and buying dollars earlier in the week, but the buying cooled off yesterday.
The Kenyan market was heavily influenced this week by the fallout from the tariff announcement by US President Donald Trump, akin to other countries where investors sold shares on fears that the emerging trade war would trigger a recession.
“Trump’s pause was received well by the market, with investors pricing in some certainty that it offers for the near term. Foreign equities investors are also waiting to see what happens next in their home markets and are therefore not rushing heavily out of the local market,” said Wesley Manambo, a senior research associate at Standard Investment Bank.
“The rally may, however, be temporary, depending on the developments around the tariffs in coming days, and the outcomes of the reviews being carried out in the pause period.”
That initial positivity seems to have given way to uncertainty as firms figure out what the tariff pause means for them. Yesterday US stocks retreated as investors sort through a global economic outlook that has improved drastically over 24 hours but remains uncertain.
Bank stocks and tech shares were hit hard, retracing some of Wednesday's epic gains amid scepticism.
Following several days of sharp losses for financial market investors, Mr Trump on Wednesday evening announced a 90-day pause on all the reciprocal tariffs of more than 10 percent, offering temporary relief to markets in Asia and Europe where a number of countries were subject to elevated tariffs of up to 50 percent.
Mr Trump was reported by US media as being concerned about increased selloffs of US bonds, usually seen as a safe haven for investors in times of global economic uncertainty—signalling that faith in the US economy was faltering amid projections of a recession by leading US bankers.
He, however, excluded China from the tariff pause, raising its charge to 125 percent from the previous 104 percent after Beijing hit the US with a retaliatory levy of 84 percent on all imports.
In the NSE, the blue chip stocks that had suffered sharp share price losses between Monday and Wednesday rebounded yesterday, which also served to demonstrate the volatility in the markets this week.
Safaricom led the gains at Sh12 billion after seeing its share price rise by 1.7 percent to Sh17.55, followed by KCB Group with a Sh7.2 billion market capitalisation gain on the back of a 6.4 percent gain in share price to Sh37.55. Equity Group added Sh5.85 billion in valuation on the back of a 3.6 percent rise in share price to Sh44.10.
The three stocks accounted for 73.6 percent of the NSE’s total market capitalisation gain for the day, and their combined traded turnover of Sh263.4 million represented 83.8 percent of the market’s total trades of Sh314.5 million.
The three counters were also the hardest hit by the downturn in the first three days of the week with a collective Sh87.56 billion drop in market capitalisation, accounting for 70.4 percent of the market’s total valuation decline of Sh124.4 billion.
I&M Group and NCBA added Sh3.97 billion and Sh2.9 billion respectively to their market capitalisation, with Co-operative Bank adding Sh1.76 billion to round off the companies with a valuation gain of above Sh1 billion.
These blue chips are among the most liquid stocks at the NSE, making them favourites of foreign and institutional investors. They are also among the most consistent in dividend payments, a key consideration for such investors.
The higher exposure to savvy investors has made them more likely to be affected by external or global market fundamentals, such as the tariff led selloff seen this week.
They were therefore more closely correlated to the trend in global markets compared to their smaller peers at the NSE.
These external markets in Europe and Asia rebounded sharply yesterday after the tariff pause. In Europe, the FTSE 100 index in London was up 5.1 percent upon opening, while Germany’s DAX was up 7.5 percent.
Asia-Pacific markets that closed earlier also reported gains, led by Japan’s Nikkei 225 Index at 9.13 percent.
Australia and South Korea’s markets gained 4.54 percent and 6.6 percent respectively, while Hong Kong’s Hang Seng index was down 0.4 percent. China’s CSI 300 Index in Shanghai rose 1.6 percent.
In the US, where markets were open on Wednesday as Mr Trump made the tariff pause announcement, the S&P 500 index closed the day (Wednesday) with a gain of nine percent, its third largest single-day jump in 80 years. The Nasdaq index was up 12 percent, its biggest gain since 2001.
