Nairobi Star (Nairobi)
Francis Mureithi
30 November 2011
A large number of Kenyans are selling their shares in listed companies at the Nairobi Securities Exchange due to tough economic times, Capital Markets Authority chief Stella Kilonzo yesterday told a parliamentary committee.
She informed a select committee probing the weakening of the shilling that Kenyans are offloading shares in key firms in large numbers while foreigners were taking advantage and dashing to purchase the shares on offer. “We have seen Kenyans liquidating their investments in several firms, the foreign investors are taking advantage of the drop of share value,” said the CMA boss.
Kilonzo told MPs that CMA has witnesses a “unique phenomena” were since most shares are undervalued and prices are low, Kenyans instead of purchasing them are offloading what they were holding. The committee established by Parliament a week ago is chaired by Wajir West MP Adan Keynan.
Its mandate is to investigate why the shilling plummeted in value against the US dollar and recommend both short and long term measures needed to be taken by the government. The committee is supposed to table its report in the House within four months. The depreciation of the shilling has pushed up the cost of borrowing from commercial banks and led to increased business costs.
The committee members said CMA was not playing its role of regulating the money markets and failing to push for prudent monetary policies but KIlonzo enlightened them that CMA has no role in directing the monetary policy as this is the prerogative of the Central Bank of Kenya and treasury.
CMA’s manager in charge of Research, Markets Infrastructure and Product Development Sammy Mulanga explained that the depreciation of the shilling had negatively impacted on the performance of quoted companies at NSE. He said poor performance of many companies could also be linked to a decline in profitability occasioned by high fuel prices. MPs claimed that the depreciation of the shilling and high inflation was largely occasioned by a cartel in the banking sector who were out to make money through speculative trading of major foreign currencies.
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