Mainstream media tell us that “rising inflation” (goods and services) and stock markets don’t mix well. Our usual retort is it depends…
Just last week Kenya’s benchmark, the Nairobi Stock Exchange rocketed 5.83%...
Kenya's NSE 3 year chart Courtesy of Bloomberg
According to Indexmundi.com, Kenya’s annual historical and estimated inflation rate…
But just as its stock market surged, Kenya’s inflation rates reportedly likewise escalated beyond estimates:
Annual inflation rates spiraled 31.5% (reuters Africa) in May on the account of soaring food prices 44% (FT.com)!
Since we have sparse idea behind Kenya’s market dynamics we suspect this to be perhaps to be related to its oil exports or tea prices.
You see, Kenya’s main exports are tea, horticultural products, coffee, petroleum products, fish and cement (indexmundi.com).
Although it registered crude oil production of a measly 9,627 barrels a day in 2006, of which exports accounted for 7,377 barrels a day in 2006 according to the Energy Information Administration.
It could be that since Africa is a hotbed for the next generation of oil and gas exploration, the sprightly stock market activities could be oil related or if not due to soaring TEA prices. Of course all of these are just conjectures on my part.
The point being: Rising “goods and services” inflation DOES NOT ALWAYS EQUAL to slumping equities.
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