Capital Markets

NSE blue chips hit new highs on foreign investor demand


Nairobi Securities Exchange trading floor. Foreign investors have pushed 12 blue-chip counters to new highs. Photo/FILE

Foreign investors have pushed 12 blue-chip counters to new highs even as the country prepares for the General Election in seven weeks.

The performance of the Nairobi Securities Exchange (NSE) in the first six trading days of 2013 appear to downplay investor risk normally associated with elections, especially after the 2007/08 violence.

During Wednesday’s trading, Safaricom, British American Tobacco (BAT) and Athi River Mining (ARM) hit highs of Sh6, Sh525 and Sh56 per share, respectively.

They closed at average prices of Sh5.80, Sh524 and Sh54.50 per share respectively following a steady upward trend since the year began.

Safaricom, which overshot its initial public offer price of Sh5 last November has maintained its rally into 2013.

By the close of trading Wednesday, its market capitalisation stood at Sh232 billion, making it the most valuable company at the NSE followed by East African Breweries (EABL) whose value stood at Sh229 billion.

East African Financial Portal chief executive Aly-Khan Satchu said that the surge in share prices which began last year had spread to more counters and was expected to continue for select companies that have become the darlings of international investors.

“Foreign Investors have been lifting supply off local investors relentlessly. I think these investors have shined a light on Africa and compared to their home markets have found plenty to get excited about,” said Mr Satchu.

Other counters that hit new 52 week highs Wednesday included Diamond Trust, Equity and NIC banks and KCB Group which touched Sh126, Sh26.25, Sh43.50 and Sh32 respectively.

Standard Chartered Bank, Bamburi Cement, Jubilee Holdings, Pan Africa Insurance and EABL also hit highs of Sh242, Sh195, Sh198, Sh45 and Sh295 after the New Year began.

Burbidge Capital managing director Edward Burbidge said the outlook for the year was promising with higher economic growth attracting increased foreign interest in private and quoted equities.

Mr Burbidge said that the implementation of the new Constitution was expected to bring in more investment opportunities to Kenya, now one of the fastest growing frontier markets, especially with the discovery of oil.

The value of the market, known as capitalisation, closed at Sh1.354 trillion, reflecting an increase in investors’ wealth of Sh82.65 billion from the 2012 close of Sh1.272 trillion.

The NSE 20 Share Index which tracks the prices of 20 most traded select stocks closed at 4,305.03 points Wednesday, having opened the year at 4,133.02 points.

“The benchmark NSE 20 Share Index witnessed its largest one day gain (1.35 per cent) supported by gains made on large cap counters,” said the Standard Investment Bank in a brief to investors.

The last time the index reached that level was in early 2011 meaning the bourse was running on a two-year high.

Eric Musau, a research analyst with Standard Investment Bank (SIB), said the demand by foreign investors was not unusual but the prices had been pushed up by low supply.

“There is a lot of optimism in the market and there is also good liquidity. Holders do not want to sell,” said Mr Musau noting that valuations of brewers globally had gone up. EABL’s share price, he added, was much higher than SIB had projected.

He attributed the demand for Safaricom’s stock to positive news regarding its new products which are expected to continue making the company profitable.
Safaricom recently launched a mobile-based platform dubbed M-Shwari which allows depositors to earn interest on money saved on their phones and borrow for short periods.
The product is an extension of its M-Pesa platform which earned the telecommunications company Sh10.4 billion in the half year to September last year with its contribution to total revenue rising to 18.6 per cent.
“Investors are looking at the fundamentals of the economy and that companies are doing well but I think that we might see a correction at some point,” said Mr Musau.

READ: Nairobi bourse tops global index trackers’ charts

James Dry, managing director of Dry Associates, said that foreign investor interest in offshore stocks had gone up particularly after legislators in the United States early this year passed a law that helped the country avoid a financial crisis.

This made it possible for investors to take on riskier assets outside the world’s largest economy.

He said that investors were also expecting Kenya’s election and transition of power to be smooth. However, it would come with a gradual slowdown without eroding the gains made, he projected.

“What you are seeing is a reconfirmation of faith after the US avoided the fiscal cliff and this leads investors to think that the same thing will happen here,” said Mr Dry.

The NSE All Share, FTSE 15 and FTSE 25 indices which track the Nairobi market Wednesday closed at 101.03, 131.61 and 134.84 points having opened the year at 94.86, 125.75 and 128.46 points respectively.

The FTSE 15 and FTSE 25 indices outperformed other emerging market indices that track Africa, excluding South Africa, and the World provided by the firm.

“Such performance will only continue to highlight the investment opportunity of Kenya to investors globally,” Jonathan Cooper, the FTSE Group managing director for Middle East and Africa, told the Business Daily earlier this week.

In terms of capital gains, the value of FTSE 15 and FTSE 25 Index went up by 39.25 and 38.66 per cent respectively last year exceeding the performance of the FTSE All World Index, FTSE Emerging Index and the FTSE ASEA Pan Africa Index which went up less than half of the Nairobi appreciation.

The total return of the two indices, which includes dividends and other corporate actions in addition to capital gains, was 46.59 and 45.86 per cent, nearly two times that of the Africa Index.

The performance of the two Nairobi FTSE indices followed closely that of the MSCI Kenya Index, provided by another London-based global indices and data provider.

MSCI said at the turn of the year that MSCI Kenya led the single country Frontier Markets index performers for 2012 followed by Nigeria and Estonia indices.