Elections have proven to be particularly difficult times for certain nations in Africa of late. At present, Kenyan citizens, as well as investors in the country, are navigating an increasingly stressful environment due to the latest election results.
The Independent Electoral and Boundaries Commission (IEBC) – Kenya’s election commission – had first declared President Uhuru Kenyatta to have won August’s election against his chief opponent, Raila Odinga, by a margin of 9 percentage points, having captured 54% of the vote.
However, the initial result was voided by the country’s Supreme Court on an appeal by Odinga – a first not only for Kenya but for the African continent as well.
Financial markets and the Kenyan shilling were sharply impacted, but they seem to have already recovered.
Already bounced back?
The graphs above and below show the movement in the Nairobi Securities Exchange All Share Index and the 10-year government bond yield respectively. The period plotted includes the run-up to the election on August 8, results on August 11, and the annulment of the vote on September 1.
Kenyan equities and bonds took a dive in the wake of the court verdict. The sharp declines in the All Share Index and the rise in the 10-year bond yield in the graphs are reflective of the strong reaction by domestic markets.
However, it is interesting to note that since the drop, which had led to a halt in trading, financial markets are already well on the recovery path. While the All Share Index remains below the level it was before the court ruling, it has consistently risen since the sharp correction. On the other hand, the 10-year bond seems to have already made up for the losses as its yield has declined to a level lower than was prevalent before the court’s ruling.
The rebound has been seen because of the firm message that the Supreme Court sent with its unprecedented ruling, which in turn gave a big boost to faith in the judicial system of the country.
Importantly, this bounce back also indicates confidence amongst foreign investors being that foreign investors were the biggest participants in the sell-off following the Supreme Court ruling.
In the next article, we’ll look at historical precedent and what it could mean for financial markets in the country.