When Raila Odinga paid a visit to the Stock Exchange
yesterday he met not only with bitter investors but with fearless bourse
directors who told him he stood accused for the meltdown in the NSE.
It is a long time since Raila took the podium in Canada
last year, and told a shocked audience that the bull run on the stock market
was due to its use as a destination for the proceeds on drug trafficking and
trade and not because of a shift in economic fundamentals. But in that time, a succession of similar
sentiments has led many investors to be particularly attentive to his
utterances, and to conclude from them that a Raila presidency would not be a
good thing for the stock markets. The ODM leader is a controversial man, one
who has often got two divergent opinions on most matters but even he would be
hard put to explain how else Kenyans should have translated his opinions.
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NSE Chairman Mbaru, long ago warned ODM against causing instability in the markets
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That the ODM leader was speaking to an educated and
discerning audience lends us to believe that he must have meant what he said.
It was hardly a slip of the tongue, and the facts prove that he could not have
been more wrong. The NSE was not growing in isolation. Across the board, large
corporate entities were reporting solid earnings; some of them even record
profits. Forward financial performance numbers for this year were looking
brighter than ever; and for those investors who elected to ignore Mr. Odinga's careless
allegations, there have been great returns on their funds. It will be up to the
individual voter to decide whetheror not the Langata MP's attitude is one of extreme
negligence but it does not bode well for his role as a guardian of the
well-being of the people of Kenya, and their economy that he should at all be
perceived as a threat to the growth and increased prominence of the financial markets.
In addition, given that it is clear the market needs urgent reform, any future
head of state will have to be able to negotiate such reforms without setting
off a panic, or dampening the confidence of investors in the bourse. This necessarily behoves his working at creating a good working relationship with the financial community, instead of anatagonising it.
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"Investors
want to know: are you a communist, a socialist or a capitalist?" James Wangunyu, VC NSE.
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It may be a belated realization of his stature and the duties that come with it, that drew
the ODM head to the stock market yesterday. But in the end it was merely a cosmetic
visit as he failed completely to answer the questions put to him, and even
worse seemed unaware of the workings of the markets.
In reply to questions on what his political ideology is, the ODM boss spoke about the need for a fairer
distribution of resources, and an increased supervision in the bourse to
protect investors. These are indeed all laudable goals, but one cannot then
understand why Raila has failed to use his prestige in parliament to craft a
law that would achieve these goals. One does not need to
be in government to bring about change, and Kenyans of all stripes who are
increasingly investing in the stock market would no doubt have been grateful
for increased protection of their savings. Kenyans for example can remember Joe Donde's interest rates bill and those of Oloo Aringo among others as a sign that even back-benchers with no clout can make their parliamentary careers count for something.
Strengthening the Capital Markets Authority
would indeed be attractive to institutional investors and even to foreign
investors looking for secure returns in a rapidly growing economy. For the
failure to achieve this, we must not just blame Odinga, but also the entire
government and the members of parliament.
The problem however is that in choosing to go about things
the way he has, Raila is causing a lot of worry. Let us assume that he is
sincere in his desire to have a better regulated bourse. Does the fact that he
is only prepared to attempt this when in State House mean that he will force
these reforms through? Does he not see that the prospect of such reforms
without the participation of stakeholders is unnerving? Does he also not
realise that given his other statements on the economy, for example on focusing
on Gross National Happiness instead of Gross Domestic Product are likely to
concern investors? Does the ODM MP have any advisers, and have they put across
to him that it is vital that the markets do not see uncertainty in the future?
We certainly do not know what Gross National Happiness and other such
formulations are, and in the stock market the uncertain leads to people pulling
their money out. That much is the reality, the markets are all about
perceptions and managing risk.
What makes the ODM leader's sentiments doubly worrying is
the fact that they are not his alone. Some of the loose talk peddled by his
counterparts like William Ruto for example portrays the kind of street talk that
would be more efficacious in village political barazas, where no eye will be
batted at such populist talk. Talk of the manipulation of the stock market and the
mis-pricing of securities coming in the same week as the Treasury attempts an infrastructure
bond listing on the London Stock Exchange (LSE) is incredibly irresponsible,
and shows just how ignorant of the world of international finance the ODM party
are. If investors see the incoming party as likely to radically change the
constitution of the country's economy, the chances of the bonds success will be
very slim indeed.
That the ODM get its act together is especially urgent as
it is not just the equity markets that have been affected by the prospects of
an ODM victory at the General Election. The Central Bank has had to up the yield
for a 10 year bond to 10.2% as investors price the risk of ODM's victory into
the bond market. The markets it seems are united in their appraisal of the ODM
team's management prowess as essentially low, but even worse unpredictable and
haphazard.
It is true that the markets are not always right and
perceptions sometimes run parallel to reality. In which case we must ask that
the ODM team do all they can to assuage investors, publish a plan for the next
five years and specific proposals for what an ODM government would change in
the system. It is not that investors and the markets do not want change. What
they abhor is surprises and a portrayal of ineptitude.
ODM can achieve this without losing anything in their
electoral battle with the government, and what's more if they win the election,
that calm will be to their advantage. When S&P's Ratings
Services for example assigned Kenya a sovereign B+' long-term foreign currency
and 'BB-' long-term local currency credit ratings, it was pointed out that this
assessment was supported by continued progress in economic reform and enhanced
macroeconomic and political stability. It was however pointed out that governance and political issues
might affect Kenya's future credit scores.
It is these credit scores that are used by investors to gauge the prices of
money to be lent in the form of bonds. With a diminished rating, the capital raising
strategies of the Treasury will fall apart, and if ODM are then in government,
it will be them ruing their brash and irresponsible approach. These are now the
big leagues, and if ever there was a need to put on their statesmen suits, this
time is it.
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Unless the government is busy with politics and ODM is busy preparing to Govern.
It was shameful to see Govt continue fomenting trouble while ODM calmed the markets.
I ask again, NSE Board officially in a statement has told us since Nov/Dec 2006, share prices have been fluctuating heavily with a downward trend, why did the government not address this instead of going on about"fish markets".
FIDUCIARY responsibility is never a forte for political parties (whose only job is politics 24-7). It is the duty of Government and on this one, they goofed.
Ethnic elites might hide behind facades, but as an investor I don't care what colour the party flag is, what song is sung, whose face is on the coin as long as there's money in it for me.
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