The Nairobi Securities Exchange was ranked the world’s third best performing last week according to a Bloomberg website report posted on Thursday last week. The NSE All-Share Index (NSEASI), which measures the market’s performance, gained 24% this year behind only behind Venezuela’s and Egypt’s equity markets, the same report said.

Official Bloomberg data indicated that the NSE 20 Share Index, another measure of the Nairobi Stock Market’s performance, climbed 16% since January this year to a year-high of 3,739 points last month.

“What happened in the first half of the year is that some counters became better priced as investors started bargain hunting…” said  NIC Capital Securities Research Analyst, Samora Kariuki. Samora gave the example of the Uchumi Supermarket share, which “…has been a big gainer, the current price better reflects its fundamentals as opposed to its price last year.”

From mid-December last year to late May this year, the Uchumi share gained 185% to reach a high of KES 19.35 since the supermarket resumed trading at the NSE in May 2011 after five years of suspension when the company went under receivership.

“The improving macro economic climate has also played a role with declining inflation and a stabilization of the currency which is expected to lead to better corporate governance.” Samora added.

The Kenya Shilling also appreciated 10% against the US Dollar in the months from November last year, to exchange at KES 84.13 today compared to KES 93.72 in November last year.

Inflation last month declined to 10.05%, the lowest inflation rate on record for more than a year, from 18.93% in December last year according to the June inflation report released by the Kenya National Bureau of Statistics last week.

Inflation reached a high of 19.7% in November last year leading the Central Bank’s Monetary Policy Committee (MPC) to raise the CBK base lending rate to 18% on 1^st December last year. According to the eighth bi-annual Report of the Monetary Policy Committee dated April 2012, these tighter monetary policy measures were adopted to dampen inflation and improve the foreign exchange rate of the Kenya Shilling.

With the Central Bank of Kenya’s Monetary Policy Committee meeting on Thursday this week, it is to be seen whether interest rates will be reduced from 18%. According to Samora, reduced interest rates could positively impact the NSE.