Kenyan stocks fall 35 pct in 2008, seen rising

NAIROBI, Dec 31 (Reuters) - Kenya’s Nairobi Stock Exchange (NSE) is expected to recover in 2009 after its main index shed 35 percent in 2008, driven by the banking and manufacturing sectors, stock analysts and fund managers said on Wednesday.

Kenya suffered a double blow this year, from the global financial turmoil and the impact of a post-election crisis that paralysed key sectors of the economy in January and February and hit the tourism industry.

The NSE-20 share index .NSE20 closed Wednesday's trade at 3,521.18 points, down from 2007's close of 5,444.83 points and a life high of 6,161.47 in January last year.

Despite the slide, stock market players said they expect a better performance next year and see the index rising above 4,000 by March, and closing even higher at the end of 2009.

“Of course 2008 has been a very bad year,” Peter Wachira, senior investment manager at AIG East Africa, told Reuters.

“Come the end of 2009, I would see a recovery in the stock market and I would bet that maybe we will be able to see a figure of 5,000 points,” Wachira said.

Fund managers and analysts said they expected the banking sector to be a bright spot in 2009, as it is well-placed to weather the global financial crisis and has been getting support from the central bank.

“Our banking sector doesn’t have sophisticated products, and they don’t lend externally, so they are not exposed to any of the risks,” said Maurice Opiyo, economic analyst at Old Mutual Asset Management.

Kenya’s central bank cut its key lending rate this month, despite the fact core inflation is running at double its target, and lowered cash ratio requirements in a bid to inject liquidity into the economy and nurture its recovery.

“My bet would be on the banking sector because we saw recently the central bank has tried to manage the interest rate environment in the market. In a low interest environment banks are able to lend (more),” Wachira said.

Kenya’s economy grew by 7 percent in 2007, but the post-election violence in January damaged hopes for 2008.

Gross domestic product contracted in the first quarter and while it has rebounded since, economists say the government’s 4.5-6 percent growth forecast for 2008 is all but out of reach.

Nevertheless, the International Monetary Fund sees growth in Kenya at between 6 and 6.5 percent over the coming three years, even if the 2009 recovery will be dampened by a global slowdown.

Analysts say they expect the bourse to receive a boost from areas such as manufacturing and retail as growth speeds up.

“On the market, sectors related to retail and industrial and allied is where people will be looking. We (also) expect manufacturing to exhibit some growth,” Opiyo told Reuters. (Editing by David Clarke and Erica Billingham)