An investor at the Nairobi Securities Exchange. Market capitalisation grew by Sh202 billion in the three months to October. PHOTO | FILE | NATION MEDIA GROUP
What you need to know:
The 20 per cent collective growth of the market — if measured through the more inclusive NSE All Share Index (NASI) that stands at 163 points — has outpaced that of the benchmark NSE 20 share index, which is up just 6.6 per cent since January to 5250 points.
Investor wealth at the Nairobi Securities Exchange has grown by Sh400 billion in the nine months to September significantly helped by the medium-sized counters increasingly gaining currency. The rally has accelerated in the third quarter, with market capitalisation growing by Sh202 billion in the three months to October.
The 20 per cent collective growth of the market — if measured through the more inclusive NSE All Share Index (NASI) that stands at 163 points — has outpaced that of the benchmark NSE 20 share index, which is up just 6.6 per cent since January to 5250 points. This has continued a trend seen in 2013 when the annual gain of the NASI was more than double that of the NSE 20 index at 44 per cent to 19 per cent.
According to analysts, the volatility of the prices of the medium and small size counters points to increased retail investor activity. “The increased activity that has helped rally the market comes from a mixture of local institutional and retail investors. Local retail activity on the smaller counters has mainly come from the high-net worth investors since big institutional investors rarely go into these kinds of counters,” said Standard Investment Bank (SIB) analyst Eric Musau.
The insurance segment which has only one of its six constituent stocks, Britam, among the NSE 20 is the biggest gainer in percentage terms this year, doubling in size from Sh76.9 billion to Sh153.6 billion over the nine months.
The banking sector has seen more growth in monetary terms while still coming from a much higher base. The segment has added Sh186 billion to push its total capitalisation to Sh892 billion, representing a 26 per cent increase.
Safaricom alone has added Sh76 billion to its valuation in the nine months, moving its market cap to Sh510 billion. Manufacturing is up Sh25 billion in value this year to Sh337.3 billion, much attributable to the increase in the share price of BAT whose value rose by Sh34 billion to Sh95 billion.
Declines in the valuations of Carbacid and EABL, by Sh6.1 billion and Sh4.7 billion respectively, have however lowered the impact of BAT’s gains.
Taking profits
With locals increasing their exposure in the market, foreigners have been taking profit. Compared to 2013, foreign investor inflows into the market are much lower. This year net foreign inflows to date stand at Sh5.3 billion compared to inflows of Sh31 billion in the first nine months of 2013, a situation analysts think is not ideal.
“Given the nature of high interest rates in the region we should see foreign inflows recover. Locals alone cannot support the market—we still need the foreign investors,” said Old Mutual Securities analyst Eric Munywoki.
With capital gains tax due to take effect from January 2015, the take-home that investors have been enjoying in the past three years will come under pressure. There remains uncertainty however over the way the tax will be implemented on equities and its effectiveness as a revenue tool in case the market was to experience a slide.
“Accounting may be complicated by things like the cutoff date for calculating the gains, while the market may decline and the government ends up not achieving its objective of revenue realisation,” said Mr Musau.
In comparison to peer markets on the continent, Kenya’s All Share Index is second behind Egypt’s EGX 100 index, which is up 27 per cent this year on relative political stability.
The Morocco MORALSI is up 10 per cent, Tunisia’s TUNIS all share index up 4.5 per cent while the Nigeria Stock Exchange all share index and the Zimbabwe ZSE index are down 0.5 and 3.9 per cent respectively.
