Stock market rallies on foreign investor interest

A stocks rally could be in the offing at the Nairobi Stock Exchange as shares in Safaricom and Kenya Electricity Generating Company excited the market on Wednesday, buoyed by bullish retail sentiment and renewed interest from foreign investors.

Safaricom closed at a one and half year high of Sh5.65 during Wednesday’s trading riding on what dealers said was increased foreign investors’ interest.

On Tuesday, it closed at Sh5.20 with 52 million shares changing hands.

Dealers said foreign investors have in the past days showed increased appetite in the market, especially in counters such as Safaricom, Kenya Airways, Mumias and KenGen.

“In most of the counters like Safaricom, the last few days has seen foreign investors snapping most of stocks while locals are selling, ”said Eva Njuguna, a dealer at Sterling Investment Bank.

Shares in utility firm KenGen surged 7.5 per cent on the back of improved investor sentiment after a slew of announcements about the firm’s capacity expansion plans.KenGen shares rose to Sh15.15 compared with Tuesday’s close of Sh14.

Athi River Mining, Kenya Power and Lighting Company and Williamson led the pack of the days gainers. Market Capitalisation surged to Sh887 billion from the previous day’s 883 billion while the NSE 20 Share Index was up 25.82 points to stand at 3370.37.

The New Year rally in the Safaricom counter has seen it race past the IPO price of Sh5 per share has fuelling investor hopes that a window was opening for them to harvest their investments. However, the shares is still below a high of Sh8.05 that it reached soon after listing in May 2008.

In May last year, a significant fraction of Safaricom’s estimated 830,000 shareholders borrowed from banks to buy the shares in the primary market at the offer price of Sh5 but most have been unable to harvest their investment or exit the counter because of the steady plummeting of the share price to below Sh3.

“Most retail investors who have been holding the stock were preparing to harvest their investment having fixed that exit price at Sh5.50,” said chairman of the Association of East African Investors Stanley Osango in a previous interview.

On Wednesday, the leading mobile phone operator traded 31 million shares - at least 80 per cent of the day’s volume that stood at 38 million.

The continued rally in the Safaricom stock price is happening without any obvious material change in Safaricom’s fundamentals but some analysts linked it to the positive announcement of a possible share consolidation that came with the publication of the company’s half-year results towards last year.

Others link it to growth potential of the firm’s data business and a recent decision by the country’s communications regulator not to lower 3G license fees for other firms.

“Safaricom is increasingly becoming a key market driver so its movement in the coming day might determine the direction of activity in the market, ” said Ms Njuguna.

“If it relents in its upward trend, it might carry along other counters and thus activity”