NSE investors’ wealth up Sh113bn in six weeks

Investor wealth at the Nairobi Securities Exchange (NSE) has grown by Sh113 billion since the beginning of the year as the gradual return of foreign demand in big cap counters drives up valuations.

Market capitalisation stands at Sh2.413 trillion compared to Sh2.3 trillion at year end, driven mainly by gains in the top three companies namely Safaricom, East Africa Breweries Ltd (EABL) and Equity Bank.

The three firms account for nearly 60 per cent (Sh67.1 billion) of the total market rise in capitalisation.

Net foreign inflows for the first two weeks of February stood at Sh695 million ($7.6 million), indicating a reversal in sentiment that saw foreigners extract a net of Sh283 million from the market in January, according to data compiled from stockbrokers and the NSE.

“There is a lot of foreign activity on the buy side showing that they still have confidence in the market in spite of the capital gains tax, which is much lower than what is charged in the competing markets in the region,” said Old Mutual Securities analyst Eric Munywoki.

Safaricom, the largest listed company with a market cap of Sh594 billion, has added Sh32.05 billion in the first six weeks of the year. The counter’s price has improved from Sh14.05 to Sh14.85 a share.

EABL has seen a valuation gain of Sh22.14 billion over the period to stand at Sh265.7 billion, with its share trading at a 16-month high of Sh336 a share.

Equity, the third largest company at the NSE by market cap, is now valued at Sh198.09 billion having added Sh12.9 billion this year. The bank’s share is trading at Sh53.50, up from Sh50 at the beginning of the year.

“The valuations are likely to remain high for these companies, driven more by market dynamics than fundamentals,” said Mr Munywoki.

“Any correction is likely to be towards the end of the year given that in a number of sectors the earnings are looking good and will therefore support the valuations.”

Other notable capitalisation gainers this year include Kenya Commercial Bank (KCB) which is up by Sh5.96 billion to Sh176.06 billion, Jubilee Holdings which is up Sh5.4 billion to Sh32.34 billion and Bamburi which has seen its value appreciate by Sh5.44 billion to Sh55.89 billion.

While it is the large caps which have driven the market this year, the growth in value is seen throughout the market with all segments on the rise save for Growth and Enterprise Market Segment, which has shrunk by Sh195 million.

This has resulted in both the NSE 20 Share Index and the NSE All Share Index gaining near similar margins this year. The NSE 20 Share Index is up 5.6 per cent to 5403 points, while the All Share Index is up 5.9 per cent to 172.9 points.

Analysts remain bullish on the market for the year, especially with the prospects of better foreign inflows that have been the bedrock of growth over the past three years.

“The market will likely make it four bullish years in a row. I expect frontier equity markets to continue to suck in cash and this will spill over into Kenya maintaining the elevated foreign investor tempo,” said Aly Khan Satchu, an independent analyst.

On a sector wide basis, the best performance has been in agriculture which shows a collective gain of 25 per cent, followed by insurance at 16.4 per cent.