The end of trading yesterday saw the 2 banks under our watch become top traders by volume. There was no change in price for either. Operations at the Nairobi Securities Exchange (NSE) saw both the All-share and the 20-share indices closed higher at 92.59 points and 4158.38 points respectively. So what factors lead to such changes? We shall not focus on any specific counters today. Instead, we will mention some of the causes of price change in the market.

• Dividend announcements – This is arguably one of the leading causes of price change in the NSE. Speculators love to feast on stocks whose dividend announcement is forthcoming. They target these periods and start spreading “information” that the given stock will earn high earnings, thus driving up the demand for it. The opposite is also true i.e. talking about a company’s poor performance and the likelihood of poor dividend pay. Both are often backed by an analysis bias towards their gain. That said, there is a chance that the information came from an insider.
• Scandals – While drama is generally good for entertainment, it does not lead to good results for a company. It boosts shareholder uncertainty and causes them to dispose of the share as a safety measure. A few examples from our local scenes are CMC Holdings, Centum Investments and East African Portland Cement. Centum failed to give a profit warning earlier on this year and were fined. Their stock price took a dive. East African Portland Cement saw changes in their chairman, a process that involved the court. Their stock price is still trying to recover from the damages. CMC Holdings is currently suspended from trading until their board room sorts out their issues. The timeline of the story can be found here (1) and here (2).
• Corporate Action – These are actions taken by publicly listed companies, usually approved by the board of directors. Shareholders give their approval in rare cases (especially in Kenya). These actions include dividend announcements, yearly results, mergers and name change. Some of these occurrences have a significant effect on a stock’s price, while some bare none.

Our securities exchange is considered a frontier market, not an emerging one. That we have it in our Kenyan financial system is because we need to have it. Efficient markets are characterized by homogeneous information meaning that information should be available to everyone. The Kenyan market is quite far from that but steps are being followed to bring it to global standards. For now, one can look out for these 3 factors if they want to sink their teeth into the securities exchange.