NSE set to break Sh1.8 trillion capitalisation barrier

The stock market looked poised to break the Sh1.8 trillion capitalisation psychological barrier ahead of the markets regulator’s set target.

The NSE, which closed at Sh1.79 trillion on Monday, made further gains Tuesday as the biggest stock Safaricom added value to become the first counter to hit the $4 billion valuation mark (Sh348 billion at Tuesday’s CBK exchange rates).

The telco hit a new high of Sh8.70 per share Tuesday helping Capital Markets Authority (CMA) near its Sh1.83 trillion target set under its strategic plan, to be achieved by 2014.

The upward movement in market capitalisation has seen investor wealth at the bourse grow from Sh1.68 trillion at the end of August.

“The Kenyan capital market has grown rapidly in the recent years with equity market capitalisation growing from Sh851 billion as at 2007 to Sh1.72 trillion in May 2013.

“The size of the Kenyan stock market compared to GDP is only 46 per cent, as of 2012, which is significantly lower than comparable countries in Africa and internationally,” CMA had said.

(READ: Regulator plans to raise NSE’s capital)

The market surge has been largely driven by consistent gains in the large caps. Nairobi Securities Exchange may have to seek more listings if CMA is to meet the target of reducing the percentage share of total market cap held by the five largest stocks though.

As at the end of September, the top five counters of Safaricom, EABL, KCB, Equity Bank and Barclays consisted of 53 per cent of the total capitalisation in the bourse, which is in line with the 2013 CMA projection.

The regulator is seeking a gradual reduction of this share to 51 per cent next year, further reducing it to 48 per cent by 2017.

Analysts at Kestrel Capital say that the past week has seen heightened investor activity on the stocks of Safaricom, EABL, KCB and Barclays mainly from foreigners.

Market gains were however tempered Tuesday by a Sh3 reduction to Sh326 in the share price of EABL as it went ex-dividend. The brewer’s stock has been on the rise since the beginning of September when it appreciated by 17 per cent.

The share is likely to come under pressure from an increase in the price of the brewer’s keg brand on which new excise tax began to apply on Tuesday.

KCB did however continue with its recent gains Tuesday, trading at a new all-time high of Sh46.75.

The equities market is also expected to gain from some of the dollar inflows that have come in from the oversubscribed treasury infrastructure bond.

Effect of these inflows is already being felt on the money market, where the shilling has gained one per cent on the dollar in the past one week alone, standing at 86.14 going by CBK mean rate Tuesday.

“The Kenya shilling strengthened further supported by dollar inflows into the debt market,” said ABC Capital in a client’s note.