Capital Markets

Trading cools off at NSE as stocks adjust after frenzy

Nairobi Securities Exchange trading floor. Equity turnover fell from Tuesday’s Sh939.4 million to Sh577.39 million. File
Nairobi Securities Exchange trading floor.  Nation Media Group

Sobriety returned to the Nairobi Securities Exchange (NSE) Wednesday as trading cooled off following the frenzy that on Tuesday lifted the market to a four-year high.

The NSE 20 Share Index dropped 11.18 points to close at 5019.73 points. Amidst warning of overvaluation, the NSE though remains on a four-year high.

“It is a market correction but turnover is good,” said Halima Saadia, a research analyst at Old Mutual Securities.

Equity turnover fell from Tuesday’s Sh939.4 million to Sh577.39 million Wednesday, with market capitalisation coming down slightly from Sh1.649 trillion to Sh1.647 trillion. Other analysts said it was difficult to sustain the price levels.

“The market exuberance witnessed yesterday seems to be fading as stocks adjust lower on profit taking. Support has been weakening primarily on relatively high valuations,” said a mid-morning report by NIC Securities.

Suntra Investment Bank analyst Johnson Nderi said the direction of the market after it cools down from the post-election euphoria would be determined by market fundamentals.

“The inflation rate is low and that bodes well for the market. However, one has to be mindful of the fact that is not supported by lower interest rates. We cannot tell, therefore, how long this bullish run will last,” said Mr Nderi.

He added that recent sentiment that some stocks are overvalued and could come down hurting the market ought to be considered alongside the fact that other stocks are undervalued. These may balance out the effect of the losing counters.

Bamburi Cement recorded the biggest fall in Wednesday’s trading, shedding Sh15 or 6.7 per cent of its value to close at Sh210 after going up by Sh8 on Tuesday.

The biggest gainer was Total Kenya, which appreciated by 9.03 per cent to close at Sh15.10 per share, having opened the day at Sh13.85. Despite prices beginning to come down they could still be propped by dividend chasers ahead of register closures.

CIC Insurance for instance announced a Sh0.10 dividend with book closure subject to shareholder approval at the firm’s Annual General Meeting expected on May 24.

National Bank’s book closure for its Sh0.20 dividend per share is expected to take place on April 12 while its peer Standard Chartered will close books on its Sh12.50 final dividend on April 17, with payment expected on May 31.

The Kenya shilling consolidated gains made against the US dollar on Wednesday, dropping only one cent to trade at 84.99 units to the dollar according to CBK mean rates.

The shilling had hit a six month high against the dollar at 84.98 units Tuesday when trading resumed after the long Easter weekend on positive sentiment over peaceful conclusion of the presidential poll petition.

The local unit held steady Wednesday as demand and supply of dollars in the market evened out, forex dealers said.

“Once we are done with the inauguration and a new cabinet is in place then business will pick up some more and the shilling is likely to appreciate further,” said Peter Mutuku, a dealer at Bank of Africa.