After a blistering start to trading in 2019 – paced by big cap stalwarts such as KCB, Equity and Safaricom, and the breaking of a four-month resistance level – the stock market has hit its first rough patch of the year.
The NSE 20 Share Index has dropped about six percent or about 180 points since peaking in mid-February. How much longer will the correction last? Is the bull market still alive? If not, is there anywhere to hide?
To understand the story better. Let’s start from the beginning. The year rally began in February. The month was full of excitement, which helped the markets mark their best performance since August of 2017.
From the lows of 2,780 points (January), the market gains of 10 percent in the subsequent four weeks was nothing short of incredible.
However, shortly after, a wave of profit took over and markets have soured since then. And as usual, congenital pessimists have taken to the ring preaching doom. But I come with good news.
One, pullbacks don’t necessarily mean that a bear market is lurking around the corner. In fact, history and data make for a strong case that this recent spate of selloffs/consolidation is nothing out of the norm.
But why I am specifically doubtful is that the swing low has yet to be validated by any actual weakness in earnings, rising inflation or increases in interest rates.
For that reason, the correction should fade easily. More importantly, people who like to invest for the long haul should stay the course instead of trying to time the market.
Two, according to several technical indicators – Stochastics RSI (14), Williams %R and Ultimate Oscillator -, the NSE is shown to have reached so-called oversold conditions in the medium term. These conditions promise at least a trading rally as the current pullback cycle has ran its course.
Several oversold reads mean that the potential for a buy or upside is high. In fact, as a general rule of thumb, whenever the broad market is showing overwhelming momentum to the down-side, it’s often a sign to act in the contrary, in this case, to “buy”.
Three, the fact that the current market still trades above several levels of resistance – 2,833, 2899 and 2,842 – is a sure sign of technical strength.
If the markets continue to hold above these levels, skittish dip buyers could possibly start re-testing the waters and putting bids back into market.
Furthermore, seeing that lots of volume has traded hands in these areas, and big volume often acts as a magnet for the market when conditions become overbought or oversold, it’s possible that these levels will become the new support.
The month of March is certainly going to be a real test for equities. That said, there are good reasons to remain confident. Key indicators – as stated above – could see the 120-point rally the market has already handed the bulls so far widen even further.
This means the 2.9 percent erased in recent trading sessions could well be the opportunity for eager bulls to venture in at the lower prices.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.