Only eight out of the 63 actively traded listed companies on the Nairobi Securities Exchange (NSE) have made a gain in their share price this year indicating the limited options for investors to enjoy capital gains in the bearish market.
I&M Bank, Standard Chartered, Sasini,KenolKobil, Kenya Re, BAT Kenya, Unga Ltd and Safaricom are the only firms that have seen share price growth, with majority of the other listed firms recording double-digit declines in valuations this year.
Collectively, the eight firms have seen their market capitalisations grow by Sh221 billion, with Safaricom accounting for the bulk of this gain, having seen its market value go up by Sh198 billion due to a sustained price rally.
The other 55 listed firms have collectively lost Sh149 billion in market valuation. The capital losses and gains, however, remain unrealised except for those who have sold their shares.
But analysts see the large downturn in prices as an opportunity for investors to buy into companies with an eye on future capital gains.
“The bourse continues on its bearish run with majority of counters facing price declines year to date…which presents an opportunity for investors to jump in on fundamentally strong companies for the long term,” said Faida Investment Bank in a macroeconomic report issued last month.
“We expect local institutional investors to remain cautious in the equities market until global markets’ uncertainty subsides,” Faida said.
Among the eight companies gaining in price this year, six are by less than 10 per cent, with Safaricom and KenolKobil the only ones to register double-digit growth at 30 and 19 per cent respectively.
Safaricom has gained Sh4.95 a share, translating to a market cap gain of Sh198.3 billion. The telco is riding on increased investor interest ahead of payment of a dividend totalling Sh1.44, whose books close on September 2. There remain chances that the price could correct downwards once the books close.
“Foreigners have been the main investors focused on the stock, with the aim of locking in the dividend of Sh1.44. Most valuations done on the stock pointing towards it being overpriced still hold water and therefore after the book closure, there is a chance of seeing the stock fall from the current trading price,” said Kingdom Securities senior analyst Mercyline Gatebi.
The gain in the telco’s share price has also seen it now account for 40 per cent of the total NSE market capitalisation that stands at Sh2.124 trillion.
“The market is heavily exposed to Safaricom, because if you look at other regional markets, a significant price change on a particular stock may not necessarily result in a huge change on the market capitalisation or indices.
“This poses some risk element to investors when it comes to evaluating a country’s stock market performance based on the market indicators,” said Ms Gatebi.
StanChart and I&M also stand out as the only bank stocks with a gain in price in a sector that has borne the brunt of the bear run.
The counters, however, enjoy the double protection of relatively high nominal prices — at Sh102 for I&M and Sh208 for StanChart — and a smaller number of issued shares traded daily compared to peers, which mean that they are less exposed to speculative trading.