Money Markets

Stock market investors reap big as real estate loses shine

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Brokers at work on the NSE trading floor in the past. Investors in stocks recorded huge gains according to various trackers. File

Brokers at work on the NSE trading floor in the past. Investors in stocks recorded huge gains according to various trackers. File 

By David Mugwe

Posted  Tuesday, January 1  2013 at  19:59

In Summary

  • The NSE 20-Share Index closed the year at 4,133.02 points, a 28.95 per cent increase from its opening level of 3,205.02 points.
  • Total investors’ wealth at the stock market increased by Sh403.76 billion during the year closing at Sh1.272 trillion.
  • Latest data on international investors from the Nairobi bourse shows that they bought shares worth Sh48.75 billion between January and November 2012 and made sales worth Sh29.14 billion, making them net investors of Sh19.605 billion.

Investors at the Nairobi bourse have emerged among the biggest gainers globally as the stock market out-performed other asset classes in 2012, driven mostly by blue chip companies and foreign capital inflows.

The Nairobi Securities Exchange (NSE) 20-Share Index – the benchmark that tracks changes in prices of a select group of 20 listed firms – closed the year at 4,133.02 points, a 28.95 per cent increase from its opening level of 3,205.02 points.

Total investors’ wealth at the stock market, which is measured by market valuation of all the companies listed at the NSE, increased by Sh403.76 billion during the year closing at Sh1.272 trillion, a capitalisation level last attained with the 2008 listing of Safaricom.

The performance of the NSE has been so strong that it outperformed other markets tracked by global index providers and data vendors such as MSCI and FTSE Group, both based in London.

MSCI ranked the Nairobi bourse as the best performing in its Frontier Markets Africa Index, while its Kenya index was the second best performing globally after the MSCI Turkey Index.

“The top three single country Frontier Markets index performers for 2012 year-to-date included the MSCI Kenya, Nigeria and Estonia Indices which posted returns of 54.16 per cent, 52.82 per cent, and 44.98 per cent, respectively,” said MSCI in a statement capturing the 2012 performance.

This means that if an investor had bought the stocks that are tracked by the MSCI Kenya Index in their exact weights, the value of their portfolio would have increased by more than half as at December 28.

Paul Wachira, the chief executive of AIB Capital, estimated that a good portfolio of stocks in 2012 returned earnings of between 30 and 40 per cent compared to Treasury bills and bank deposits which would have earned investors between 14 and 15 per cent after interest rates dropped sharply during the year.

Amos Kosgey, a portfolio manager at Apollo Asset Managers, said the stock market out-performed even the real estate sector, which was slowed down by high borrowing costs at the beginning of the year and jitters about the upcoming General Election in March.

Rising prices of building materials also affected real estate investment projects. According to real estate consulting firm Hass Consult, developers shelved building projects in the first half of the year as demand for new units dropped sharply following a steep increase in lending rates to over 25 per cent.

The slow down in construction is reflected in the Kenya National Bureau of Statistics data which shows the sector grew by 0.6 per cent in the third quarter of 2012 down from 1.4 per cent and 3.2 per cent in the second and first quarters respectively.

The growth in production and consumption of cement also slowed down by 0.6 per cent and 1.5 per cent during the third quarter compared to expansions of 8.9 and 7.7 per cent, respectively, over a similar period in 2011.

In its third-quarter market report, Hass Consult estimated that returns for house developers stood at 13.81 per cent “across both rental yields and house price appreciation.”

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