NSE traders. [Photo/dhahabu.co.ke]

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Kenya’s money and stock markets have this year shrugged off political tension and prolonged electioneering to remain resilient. The stability prompted National Treasury Cabinet Secretary Henry Rotich to wonder why Kenyan journalists were not telling this story.

“I am surprised that you have not reported how the markets have remained stable despite the prolonged electioneering,” Rotich said, adding that the stability is an investors’ vote of confidence on the economy. “We have seen the presidential election annulled and parties respecting the court ruling. Surely, we need to be told why a working democracy has been good to our economy,” said Rotich.

The Kenyan currency has demonstrated remarkable resilience against the US dollar since January. The shilling has been hovering between Sh103.5 and Sh103.7 against the greenback. But that is only half the shilling’s stability story.

The other side of the story is that the state of the markets today is a deliberate effort by Treasury and Central Bank of Kenya (CBK) to maintain stability. For example, CBK has had to intervene in the market to prevent volatility in the foreign exchange market.

Soon after the Supreme Court annulled the presidential elections on September 30 and in the run-up to repeat presidential poll on October 26, CBK dealers moved into the market to sell dollars. At a past press conference shortly after the ruling, CBK Governor Patrick explained the approach in maintaining a stable foreign exchange environment. “It’s not our policy to save the currency.

Then there are investors who see the Kenyan stocks as grossly undervalued. It is these investors who are responsible for the stability of the NSE according to John Nderi. “Take KCB Group shares for example.

There was a time they were trading at Sh60. NIC Bank had a high of Sh90 while Centum has had a high of Sh88,” says Nderi, corporate finance, and advisory manager at ABC Capital. But while foreign exchange and equities market have been stable, it is a different story for the fixed income securities market.

There are too many short-term factors at play including economic growth, the rate of money supply, overnight lending rates, open market operations, and tax remittances,” said Moturi. But the biggest contribution to the slowdown in the fixed income market has been the interest rate capping which has changed behavior patterns of investors.