The Capital Markets Authority (CMA) recently issued its first-quarter 2018 report. Let’s briefly look at key numbers, trends and players.
Markets: The Nairobi All-Share Index (NASI) scored a full-quarter gain of 11.8 per cent—this is down 4.2 per cent to date. Equity #ticker:EQTY turnover tripled to Sh61 billion compared to the previous quarter with Safaricom #ticker:SCOM, Equity and Kenol Kobil #ticker:KENO accounting for nearly two-thirds of the turnover. Gains in the three—Safaricom (12.8 per cent), Kenol (21) and Equity (32.5) helped push the overall index higher.
In the secondary bonds market, Sh147.4 billion worth of bonds were traded (a 10-year record compared to similar periods) while in the primaries, Sh146.9 billion worth of government bonds were issued, up 88 per cent from the previous quarter.
My thoughts: Markets soared on the back of declining inflation rate (dropped to 4.18 per cent in March from 4.83 per cent in January), a return to political normalcy and a rejuvenated corporate sector. Bonds especially benefited as a result of the rate cap law. Should these macro factors continue to hold, prices would keep pushing higher limits.
Collective Investment Schemes: Total assets under management rose marginally to Sh57.2 billion. Government securities still accounted for the largest portion at 45.8 per cent (or an equivalent of Sh26 billion) while equities accounted for 13.6 per cent of the assets (or an equivalent of Sh7.78 billion). Some 75 per cent of these assets were held in categories deemed safe.
CIC Unit Trust scheme still controlled the largest book at Sh15.4 billion. According to the report, five management houses (out of 16) controlled 75 per cent of the total assets under management. My thoughts: At 68.7 per cent of total investor holdings, local institutional investors are holding the biggest chunk ever of the market since 2012. As markets get stronger, this could unlock more inflows into these vehicles. This could trigger a reorganisation of the current investment mix.
Foreign Investors: Average Foreign Investor participation (as measured by equity turnover) dropped to 57 per cent compared to 64 per cent in Q4.2017. Foreign investors were net sellers at Sh8 billion – a seven year record compared to similar Q1 periods.
The month of February registered the highest outflow at 63.5 per cent of the total net outflows. Foreigners have been net sellers in 11 of the past 13 months. March Foreign Investor Buy/Sell ratio stood at 0.88 – a net sell position.
By end of March, they accounted for 19.86 per cent of the total investor holdings. My thoughts: The Federal Reserve hawkish stance has been a cause for concern. The quarter percentage point rise in March, which was the sixth such increase since 2015, exacerbated matters. Going forward, a fat war chest (read currency reserves) should help balance things in keeping the exchange rate stable. Kenya shilling gained 2.3 per cent to Sh100.84 in above period.
Post March-to-date, we know this; equities have hit a rut beginning April after coming out strong in Q1.2018. Foreigners are hitting the side-lines, bonds are trying to do something and the shilling is still strong. But here’s the bottom line; Q1 stats don’t matter if you’ve set your eyes on the long-side. Stay positive.
Mwanyasi is managing director, Canaan Capital Limited [email protected]