A rally in Safaricom, EABL, Equity and KCB stock prices at the Nairobi Securities Exchange (NSE) in the first week of February has helped the bourse claw back nearly half of the market capitalisation it lost in January.
The bourse has gained Sh57 billion in market capitalisation since February 1, thereby trimming the year-to-date decline in value as at Wednesday’s prices to Sh66 billion from a high of Sh123 billion recorded at the end of January.
The bourse’s market capitalisation now stands at Sh1.983 trillion, compared to Sh1.926 trillion at the end of January and Sh2.049 trillion at the beginning of the year.
Safaricom’s 60 cents price gain in the past one-and-a-half weeks has boosted the company’s value by Sh24 billion, with EABL, Equity and KCB adding Sh11 billion, Sh7.4 billion and Sh5 billion respectively following share price gains of Sh14, Sh2 and Sh1.50.
The counters have seen significant foreign investor buying in the past week which pushed their share prices upwards.
“After three consecutive months of selling, foreign investors turned net buyers on KCB, which recorded the highest net foreign inflows at $3.68 million.
‘‘EABL had the second highest net foreign inflows of $3.3 million and touched a three-week high of Sh275 riding on positive first half 2016 numbers,” said Standard Investment Bank in a summary of trading for the first week of February.
The decline recorded in January was largely on account of lower prices in banking stocks, which collectively shed Sh28 billion in value during the month.
The lenders are however picking up now as they approach their full-year results announcement season, with the profits of most large banks expected to grow thereby pushing up the industry’s earnings.
Although 17 listed firms have announced profit warnings since January last year for the 2015 full-year financial results, analysts reckon that the market has largely factored this into the current prices.
Market watchers are projecting that investors in listed stocks are unlikely to suffer heavy erosion in wealth like was the case in 2015, when the full-year capitalisation decline hit Sh250.5 billion.
Cytonn Investments said that past experience shows that the projected higher growth in the gross domestic product (GDP) may provide some level of support to the performance of the market, and will provide a stronger underlying base for fundamental growth in earnings.
The expected stability in interest rates and inflation are also positives for the equities market, which is competing against fixed-income and real estate sectors for investor flows.
“Three factors (GDP growth, inflation and interest rates) support the positive performance of the stock market, three factors (investors’ sentiments, corporate earnings growth and valuations) support a neutral stance, and only one, exchange rate, points towards poor performance of the market,” said Cytonn Investments.
On the other end of the scale, small cap counters have largely missed out on the price rally seen over the past week.
In the agricultural segment of the bourse, Kapchorua Tea, Limuru Tea and Sasini have registered price declines of 25, 16 and five per cent respectively over the period, while TransCentury and Kenya Airways are down 17.3 and 6.3 per cent in that order.
Such counters rarely attract foreign investor attention, meaning that their gains are often driven by local retail investors trading.