A trader looks at a board displaying EABL’s stock trade price in May 2015. Dollar investors at the Nairobi Securities Exchange (NSE) have seen their returns rise over the past one month on the back of a favourable exchange rate environment, lifting the gloom brought by negative returns last year. PHOTO | FILE
What you need to know:
Dollar investors at the Nairobi Securities Exchange (NSE) have seen their returns rise over the past one month on the back of a favourable exchange rate environment, lifting the gloom brought by negative returns last year.
Data compiled by African Alliance shows the dollar return on the NSE FTSE 15 index stood at 4.3 per cent for the one month to March 7, while the year to date return is also in positive territory at 0.9 per cent.
Dollar returns for a market are important for foreign investors, given that foreign currency-denominated investments erode or gain when booking gains as the investors convert their proceeds.
Dollar investors at the Nairobi Securities Exchange (NSE) have seen their returns rise over the past one month on the back of a favourable exchange rate environment, lifting the gloom brought by negative returns last year.
Data compiled by African Alliance shows the dollar return on the NSE FTSE 15 index stood at 4.3 per cent for the one month to March 7, while the year to date return is also in positive territory at 0.9 per cent.
In the full year 2015 the dollar return stood at a negative 23 per cent, caused in part by a 12 per cent depreciation of the shilling against the dollar and a bearish market whose capitalisation shrunk by Sh251 billion.
International investors normally pick their portfolios based on the FTSE NSE indices. The FTSE NSE Kenya 15 Index tracks the performance of the largest 15 stocks ranked by full market capitalisation while the FTSE NSE Kenya 25 Index tracks the performance of the 25 most liquid stocks.
The shilling has slightly appreciated to the dollar this year by 0.8 per cent to exchange at 101.50 units, which coupled with price gains on large cap index stocks such as Safaricom, EABL, Equity Holdings, Co-operative Bank and BAT has lifted the returns enjoyed by the foreign investors.
“The stock exchange was relatively bullish in February 2016 with brokers reporting net foreign investor inflows. The controversial capital gains tax that undermined investor sentiment in the first half of 2015 was scrapped effective January 1, 2016, which is likely propping up the market performance,” says research firm Stratlink Africa in their March 2016 market note.
“The shilling has held firm against the greenback exchanging in the 101-102 band in line with expectations for the first quarter of 2016. We expect it to remain broadly stable over the next two months, with marginal movement, if any, outside our anticipated band of 101-103.”
Dollar returns for a market are important for foreign investors, given that foreign currency-denominated investments erode or gain when booking gains as the investors convert their proceeds.
The dollar return for the NSE’s peer African markets is also looking up.
The returns over the past month for the Nigeria Stock Exchange stand at 4.9 per cent, while the Tunisia stock exchange return stands at 3.2 per cent over the same period. Morocco stock exchange dollar return stands at 2.7 per cent.
The larger Johannesburg Stock Exchange (South Africa) has the highest dollar return at 10.6 per cent over the past month among the 18 African stock exchanges reviewed by African Alliance.
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Note: The results are not exact but very close to the actual.
