The Nairobi Securities Exchange has shown improved performance this year, with the NSE All-Share Index and NSE 20 Share Index gaining 24% and 16% respectively this year. The market was rated the third best performing last month by Bloomberg.

Yesterday, shares on the NSE reached a 12 month high according to Reuters.

“Going forward, we have to keep an eye on the political outlook as investors will be watching out for any adverse developments.” said Samora Kariuki, a Research Analyst at NIC Capital Securities commenting on the performance outlook of the NSE for the remainder of the year.

Political stability plays a role in the performance of the NSE according to a study titled ‘Determinants of investor confidence for firms listed at the Nairobi stock exchange, Kenya’ dated 2011.

Furthermore, ‘Volatility of the market appears to be lowest in the years just before a general election and also in the election years themselves.’ according to another study on the NSE’s performance before and after Kenya’s past four General Elections.

The same study shows that the NSE performed better in the two years after Kenya’s 2008 General Elections than in the two years before the election adding, “The poor performance before the election could be attributed to investor anxiety and panic associated with pre-election period.”

One month after the January 2008 post election violence following Kenya’s disputed 2007 General Elections, NSE All Share Index stood at 95.15 points which is 13% higher than that yesterday’s close of 82.51 points at the NSE (data from myStocks!)

With Kenya’s next General Elections nine months away, the performance of the NSE will be under close scrutiny to determine whether the same lowered performance will occur similar to before the 2007 elections.

Pesatalk will continue to analyze possible outcomes of the NSE in light of this.