NSE banks on better half-year results to rise above 5000
The Nairobi Securities Exchange logo. File
What you need to know:
The index closed 14 points down yesterday at 4896 on the back of slight big cap decline, having traded largely in a band of between 4750 and 4950 points in the past two months.
The equities market is banking on an investor buzz from the half-year earnings season for a push-back above the 5000 points barrier. The main market index, the NSE 20 share index, has been flat year-to-date with a decline of 0.3 per cent and has held below the key 5000 points mark since the end of January.
The index closed 14 points down yesterday at 4896 on the back of slight big cap decline, having traded largely in a band of between 4750 and 4950 points in the past two months.
Analysts said gains in price for individual stocks this year have been driven by financial announcements and corporate actions, especially when investors anticipate improvements in performance.
“The ongoing half-year earnings reporting season is poised to be a positive short-term catalyst for the market, thus we anticipate further share price advances,” said analysts at Genghis Capital in a market review note.
Housing Finance, East African Cables, British American Tobacco and Athi River Mining Company all announced their half year results last week. ARM posted positive earnings, growing its revenue by 16.4 per cent to Sh7.6 billion amid a competitive cement sector, with a 21 per cent increase in net profit in the six months to Sh847.2 million.
The improved performance of the cement firm could yet give a boost to its stock, which alongside that of Bamburi has declined this year in value by 13 per cent (Bamburi -16 per cent). Housing Finance’s half-year net profit rose 19.5 per cent to Sh474.4 million.
Security threats
HF’s share has risen 40 per cent this year and is currently trading at Sh46.75, having hit an all-time high of Sh51 in the aftermath of the announcement of the sale of its shares held by Equity to Britam.
One sector being watched keenly by investors is banking, with six-month earnings expected to start streaming in this month — within the regulatory deadline of the end of September.
KCB, which led the sector in quarter one profits, has gained almost 15 per cent in the second quarter to move to an all-time high of Sh54. The bank has been locked in a profits race with Equity Bank, which has seen its share appreciate by 40 per cent to Sh45.50 in the second quarter.
Other than financial results, analysts say investors, especially foreign ones, are also watching with interest the way the country handles security threats and whether political temperatures willcool down sufficiently.
“It will also be about how fast the business environment can stabilise in the eyes of investors, some who have been agitated by the insecurity and political noise,” said Old Mutual Securities research analyst Geoffrey Maina.
In the medium term, emerging markets are also likely to experience foreign capital outflows as the US Federal Reserve finally moves to end its bond buying stimulus programme expected to happen in October.
“To some extent the markets have factored in the Fed cutbacks, but coupled with a rising risk premium in emerging markets following unrest in various parts of the world we could see investors take refuge in developed markets,” added Mr Maina.
