Small caps cushion NSE from blue chips’ price correction
The NSE All Share Index has gained three per cent this month. FILE
What you need to know:
The NSE All Share Index has gained three per cent this month compared to the NSE 20 Share index which has lost 0.3 per cent in the same period.
Improved prices of small and medium cap stocks at the Nairobi Securities Exchange (NSE) has helped cushion the bourse from the a correction in the prices of blue chips.
The NSE All Share Index (NASI), which tracks the market performance of all the listed counters in the market, has gained three per cent this month compared to the NSE 20 Share index which has lost 0.3 per cent in the same period.
Analysts say the stronger performance of NASI indicates that listed small and medium sized firms with market capitalisation of between Sh39 million and Sh45 billion have been performing well.
“Strong earnings growth reports from counters such as Housing Finance, Mumias Sugar and Longhorn Kenya spurred investor activity indicative of direct investor reactions to earnings updates,” said Genghis Capital in their weekly market analysis.
Big cap counters were on the decliners list including KCB, down 3.8 per cent to Sh44, Equity down three per cent to Sh32 and Safaricom which declined 3.4 per cent to Sh11.40.
The NASI takes into account the performance of all the listed companies at the bourse, unlike the NSE 20 Share index which tracks the performance of 20 top companies weighted mainly on market capitalisation, shares traded, number of deals and turnover.
The smaller firms have also been seeking new growth areas through diversification and a pursuit of business in the region with insurance counters attracting demand ahead of what are expected to be good full year 2013 earnings.
The group subsidiaries, Kenya Building Society and Housing Finance Insurance Agency, contributed 18 per cent to its profit before tax compared to less than one per cent in 2012 when they were formed. The HF share is up three per cent since the beginning of the month.
Last week, publishing firm Longhorn Kenya said its regional expansion in countries such as Malawi was paying off. The company reported a 78 per cent increase for the six months to December 2013 compared to a corresponding period last year.
“The company’s growth has been fuelled by ventures in the export market where we competitively won various government tenders to supply school books in Malawi, Rwanda, Tanzania and Uganda,” said Longhorn managing director Musyoki Muli in a statement last Thursday.
The agricultural segment, composed mainly of small and medium cap counters, has been the leading gainer in the past one month, with its collective capitalisation going up 6.12 per cent to Sh12.8 billion.
The segment’s gains since the beginning of January stand at 23.2 per cent, the best in the market.
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