NSE breaks through Sh2trn market valuation ceiling
Nairobi Securities Exchange (NSE). The market valuation closed at Sh2.005 trillion January 21, 2014 after toying with breaking the record mark for the last week as local investors took positions in the equities market. Photo/FILE
What you need to know:
Total value of all 61 companies listed on the Nairobi Securities Exchange (NSE) stood at Sh2.005 trillion at the close of trading, a 4.17 per cent gain on the opening capitalisation this year.
The NSE 20-Share Index, which tracks performance of a select group of listed companies, rose by 51.94 points to close at 5075.06 with local investors being the main buyers.
Investors are said to be moving away from fixed income securities on expectations that interest rates will drop once the Treasury issues the anticipated sovereign bond.
The NSE broke through the Sh2 trillion market valuation ceiling for the first time in its history Tuesday, driven by Safaricom that touched a record share price of Sh12 before closing at an average of Sh11.75.
The total value of all 61 companies listed on the Nairobi Securities Exchange (NSE) stood at Sh2.005 trillion at the close of trading, a 4.17 per cent gain on the opening capitalisation this year.
“It’s driven by fiscal policy. Investors are taking positions early because the government borrowing from outside is expected to suppress interest rates so you don’t want to come in when prices are up,” said ABC Capital manager for corporate finance and advisory Johnson Nderi.
The NSE 20-Share Index, which tracks performance of a select group of listed companies, rose by 51.94 points to close at 5075.06 with local investors being the main buyers.
Investors are said to be moving away from fixed income securities on expectations that interest rates will drop once the Treasury issues the anticipated sovereign bond.
A fall in interest rates results in investors seeking higher rewarding assets, with equities being a choice investment. Lower interest rates would allow investors to borrow more to invest in equities, raising demand and prices of shares.
Those buying now are hoping to sell the shares to those who will be seeking entry after fall in interest rates.
Safaricom, which has been the main driver of the market in the past month, received support from the banking counters to lift the capitalisation above the Sh2 trillion mark. The company’s valuation at NSE rose by Sh2 billion.
Equity gained Sh3.7 billion following a one shilling rise in its share price. Other top gainers include British American Tobacco whose value rose by Sh1.8 billion, insurer Britam which gained Sh1.6 billion and beer maker EABL which gained Sh1.5 billion.
“Foreign investors accounted for about half of volumes,” said Standard Investment Bank in a daily market report.
Analysts expect the market to remain above the Sh2 trillion mark in the short term arguing that the drivers of the market, macro-economic factors, are sustainable.
“Before the release of full year results we expect it to be sustained if the demand is maintained,” said Genghis Capital research analyst Silha Rasugu.
The Kenyan market is, however, expected to be adversely affected by a looming decision by the American Federal Reserve Bank to cut supply of cheap cash in the world largest economy. Reversal of the monetary policy will see investors go back to their home markets where interest rates are expected to rise.
“The impressive numbers on our market capitalisation and on the NSE 20 Share Index, corroborates our expectation of the bullish outlook for the equity market as we delve into a new year” said NSE chief executive Peter Mwangi in a statement.
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