As you know i believe the NSE(Nairobi Stock Exchange) is overvalued.However, in investing you must look at different views (you could be wrong).There are several factors that could lead the market higher: 1.Demand has shifted.(higher demand higher prices)
More people are getting into the market, thus demand for shares is increasing but supply is relatively the same.New players are still getting into the market i.e. directly, via unit trusts and investment clubs.Almost everybody i know is buying or trying to buy shares.
2.Price is influencing price
'Higher prices beget higher prices' someone said(cant remember who).As prices rise people buy more shares in the hope of getting on the train of higher prices.Their purchases fuel a further price rise...and the cycle continues.Notice ARM,Mumias,NBK,NIC have been showing this kind of behaviour.
In comparison with other African markets(except South Africa) our prices(NSE) are still low in terms P/E multiples.Large companies are trading at P/E of 25 and above on the Nigerian Stock market NSE still has companies under 25 so there is still a ways to go.
I think NSE will cross 5000 mark this year. Bull markets last longer than anyone expects and crash faster and sooner than anyone does.Few expected the Dow Jones to cross 11,000 in its last recovery and the FTSE100 to cross 6,000 but they did.