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Wednesday, October 24, 2007

The Implications On The NSE Of The Chairman's Political Affiliations

Guest post By John Maina

Many have been quick to politicise comments made by ODM Presidential Candidate Raila Odinga about the NSE. They have singularly associated the share index downward trend to his earlier comments on drug money finding its way to NSE also his concerns of share manipulation by a few well connected individuals. Paul Muite the chair of (Departmental Committee on Justice and Legal Affairs) similarly expressed the latter concerns albeit both politicians did not give details.

Chairman of the NSE, crafty Jimnah Mbaru

On Raila Odinga’s comments many have castigated him as an anti-development, alleged he is a communist, thus he would nationalise the listed companies. Others have even argued that he is a propagandist seeking political mileage.

However, many have overlooked the fact that Raila himself owns various private businesses and has strongly argued against his distracter that he has heavily invested at the NSE

Moreover, many people have glossed over others factors likely to be impacting on the downward trend. Such include, investors disposing of share in readiness to safcom IPO and the Christmas festival.

Other reasons as recently pointed by the NSE board are the rising inflation resulting in disposal of stocks so as to buy basic commodities.

Jittery investors holding back in anticipation of the political transition and uncertainty on the direction that the stock market is taking cannot be ruled out either.

One significant but overlooked factor that might also be contributing to the share index downward trend is that of the NSE chairman’s political affiliation and utterances.

Though as a presidential candidate Raila utterances and policies will have an impact on NSE, so too would the utterances and associations that the NSE chairman makes.

It is worth noting that, apart from being the current NSE chairman, Jimnah Mbaru also owes the largest investment bank/stock breakage firm in Kenya. His firm has won very many lucrative contracts from the current government. He is also a member of the presidential national advisory council on socio-economic issues. Also a member of T.C.L an investment clubs whose members are who is who in the current regime. This club has clinched top notch deals within a short period.

Contentiously, the NSE Chairman is also a staunch support of the current regime and is rumoured to be eying a parliamentary seat. He was recently in London with the president daughter and Equity bank CEO vilifying Raila. Not long ago he commented that an O.D.M win at the general election would cause the market to tumble. It is said that he has the regimes eye and ear.

Above issues may be interpreted by investors as resistance to changes likely to be introduced by and ODM government if it comes to power.

Yet it is clear to anybody that has been investing at the NSE that, just like the Capital Market Authority, both are screaming for revolutional transformation from the gentlemen’s club they are, into a modern efficient, effective and transparent stock market and regulatory body.

Other investors may foresee a conflictual relationship between NSE (If led by the current chairman) and a future ODM government when the chairman refuses to be politically neutral.

There are also concerns the chairman has not come out to strongly condemn recent alarmist and false remarks attributed to the finance minister on the NSE losing 200 billion whilst the actual figure was 5billion.

Ironically, the chairman’s has neither come out to reassure anxious investors about the increasingly politicisation of the NSE

From this one can conclude that the chairman cannot hold onto his seat and at the same time engage in politics without impacting on the share index. Indeed, stand presents a conflict of interest. Therefore, the best the chairman can do to reassure investors is to stick to one role rather than apportioning blame where it is not due.

The writer is a member of Kenya Capital Investment Group,

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