Nairobi Stock Exchange has suffered a big setback following a high cliff drop in Investor wealth which is already troubling insurance firms and pension funds.
According to market reports, the NSE value collapsed by U$2,389,515,000 (approximately Ksh241 billion) in the second quarter of the year as blue chip stocks slid under the weight of profit-taking.
This decline has negative effects on the gains that investors made in the first three months of 2018, when the market turnover rose Sh296 billion, leaving a net gain of Sh55 billion for the first half of 2018.
Particularly hurt insurance firms and pension funds will be hurt because they were banking on equity gains to grow returns at a time when earnings from other asset classes such as fixed income and offshore investments have remained low.
NIC Securities analyst Bill Oloo said that the profit taking was largely from investors, who had taken positions in the market in January, just before the quarter one rally in which most blue chips made double-digit gains.
“By the time they did their analysis at the end of March, companies such as Equity Group , Safaricom , KCB , EABL and DTB had all posted solid double-digit returns, forcing some investors to close out their positions after meeting their targets much earlier than anticipated,” Mr Oloo said.
He added that the vigour displayed by investors in the first quarter may have tapered off resulting in the weak second-quarter performance.