I have a question for long-term expert observers, analysts and economists.

I do not have factual/economic/scientific basis but from my layman and not-so long-term observations, my hypothesis is that the NSE for reasons I cannot competently explain, performs best when we got prolonged periods of high inflation, high interest rates and heavy government borrowing, which seems to be setting on now. This could be partly because smart money avoids sitting in banks so as to beat inflationary depreciation....

Keen watchers, is there any truth in this hypothesis?

We must be twins separated at birth

There is no truth in your hypothesis as it is based on false assumptions first, that smart money avoids sitting in banks. Kenyans love putting their money in banks the best in fixed deposits. Before Kengen IPO the number of CDSC accounts was 70,000. In times of inflation and high interests rates kenyans run to real estate. The only people who benefit are the foreign investors who buy govt debt at good rates and take rich pickings in the stock mart. The smart money with fund managers in kenya has been bleeding because NSSF no longer invests in the stock market and Uhuru allowed the pensioners to remove their savings so they have to cover for withdrawals

http://www.rba.go.ke/doc...nts-as-at-June-2010.pdf

I think this should interest you. Quoted equities for pension schemes was valued at 111 billion. Retail investors are quite a force in this market.