Markets & Finance

NSE investors lose Sh243bn after rates cap hits bank shares

Investors at the Nairobi bourse have recently lost nearly a quarter of a trillion shillings worth of wealth following a rout of banking stocks that affected other equities shortly after enactment of a law controlling interest rates.

Within the first eight days of the enactment of the law, the investors with shares listed on the Nairobi Securities Exchange (NSE) lost Sh243 billion, that had improved to Sh215 billion loss as of yesterday.

With the bourse valued at Sh1.895 trillion yesterday, the loss is a fifth of the value relative to the Sh2.11 trillion hit on the day just before the Banking (Amendment) Bill was signed into law by President Uhuru Kenyatta. At its lowest recently, the market cap came down to Sh1.867 trillion.

“Banking stocks were very popular before the capping of interest rates. But quite a number of investors sold their stocks after the new law was put in place. It has become a general trend for stock prices to fall,” said Raymond Kipchumba, research analyst at Nairobi-based ABC Capital.

He said the bourse is facing multiple pressures, not only from the recent law on banking but also the uncertainty relating to the next General Election scheduled for August 2017 and the Brexit jitters.

The UK’s decision to exit the European Union, for example, has been associated with foreign investors getting risk-averse with regard to assets in emerging and frontier markets.

“The General Election in 10 or 11 months is itself creating some uncertainty as always happens in such times but investors with a long-term mindset usually have an upper hand,” said Mr Kipchumba.

Safaricom dividend

However, some foreign investors had initially targeted dividends being declared or paid in the coming months by some of the NSE companies.

Mr Kipchumba noted that the Safaricom dividend of Sh1.44 — billed the highest ever for the economy in a single year — was earlier a major attraction as it ensured the company hit a high of Sh21.75 per share recently.

However, the share price fell as soon as the book closing data arrived a week ago. Barclays Bank is another company whose share price fell by a limited margin due to the declared interim dividend.

READ: Kenyan banks seen attractive for long-term investors

Burbidge Capital head of research Vimal Parmar said it would be difficult to tell where the market is heading due to the uncertainty of foreign investor flows besides that around the law capping interest rates.

“We can say much about the near future. Currently, between 70 and 80 per cent of the market activity is from foreign investors, which means that they are a major determinant of the direction of the market.

“And we can’t tell in advance about these foreign flows,” said Mr Parmar.

Banks have not recovered from their double-digit price declines. Equity Bank has experienced the biggest loss of 26.4 per cent followed by KCB Bank, which has lost 19.1 per cent, and I&M has shed off 16.4 per cent.

Even in the past one month, the banks including Equity, National Bank and Coop Bank are among the biggest losers in share prices.

Non-banks that have seen their value shaved off by more than 15 per cent in the past month include East African Portland Cement, Britam, East African Cables, the Standard Group and Sanlam.

[email protected]