A Nairobi Securities Exchange staff monitors trading on the electronic board. PHOTO | FILE
What you need to know:
The NSE is lagging behind in both index and dollar returns compared to peers such as Egypt, Morocco, Tunisia and South Africa.
The year-to date return of the NSE All Share Index stands at -5.8 per cent, while the 20 Share Index is 18.7 per cent down since January.
African peer markets have outperformed the Nairobi Securities Exchange (NSE) in the first three quarters of 2016 with the Kenyan bourse pulled down by a sharp decline in September following the cap on bank interest rates.
Data compiled by African Alliance on continental stock markets shows that the local bourse is lagging behind in both index and dollar returns compared to peers such as Egypt, Morocco, Tunisia and South Africa.
The year-to date return of the NSE All Share Index stands at -5.8 per cent, while the 20 Share Index is 18.7 per cent down since January.
The third quarter of the year has accounted for most of the NSE’s decline, in large part due to the fall in bank shares last month following the rate caps.
Some of the counters though have shown signs of recovery in the past week.
“Among the top 10 stocks by market cap, Safaricom was the only gainer in the third quarter 2016 on the back of the company issuing a special interim dividend of Sh0.68 per share. Co-operative Bank, Equity Group, KCB Group, DTB and Barclays declined by 25.3, 20.1, 17, 15.8 and 15.1 per cent respectively, following the enactment of the Banking Act Amendment 2015 that capped the maximum rate chargeable on loans by banks to four per cent above the Central Bank Rate,” said Cytonn Investments in their latest quarterly market report.
Among the other top six African bourses, Morocco Stock Exchange’s all share index is the best performer with a year-to-date return of 12.5 per cent, while the Johannesburg Stock Exchange all share index is up 2.48 per cent.
The Egypt Stock Exchange EGX 100 index has gained 1.94 per cent this year and Tunisia’s Tunis Exchange 5.9 per cent.
The Nigeria Stock Exchange All Share Index has a -1.1 per cent return, with the Zimbabwe Stock Exchange industrial index the worst performer at -13.8 per cent.
For dollar investors, the return for the NSE is -4.8 per cent, with the stable shilling helping investors eke out small gains for investments that are shilling denominated.
On the back of a rapidly depreciating naira, foreign investors in Nigeria have booked a 37 per cent decline in dollar terms, which works to the advantage of competing markets such as Kenya.
South Africa and Morocco, however, offer a higher dollar return for investors compared to Kenya, at 16.7 per cent and 14.3 per cent respectively.
The Kenyan market has as a result seen rising purchases by foreign investors, attracted by the lower share valuations that make for a good entry point into the bourse.
In terms of outlook, analysts at HTM Capital, however, say the banking sector, which accounts for more than a quarter of the markets total value of Sh1.98 trillion, might bring further negative impact should financial results show significant decline as a result of lower margins.
“With interest controls set to negatively impact 60-65 per cent of banking sector revenue (net interest income), the sector’s new revenue and profitability reality is bound to suppress NSE’s performance,” says HTM Capital in their latest business and economics report.
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Note: The results are not exact but very close to the actual.
