The market concentration of the top five listed firms on the Nairobi Securities Exchange (NSE) slipped further last year, new data shows, as investors diversified purchases to other counters.
The concentration of the top listed firms, which is measured by market capitalisation, fell to an average of 64.89 percent last year from a higher 67.07 percent in 2023 according to statistics from the Capital Markets Authority (CMA).
The drop in dominance indicates that investors took positions in other counters outside of the top five listings, helping shore up the prices of alternative firms and their respective market capitalisation.
“Over the past year, there has been a continuous reduction in market concentration by five specific companies, indicating a growing openness among investors to explore opportunities beyond these select entities,” CMA said in its 2024 fourth-quarter market soundness report.
Safaricom, Equity Group, EABL, KCB, and Standard Chartered Bank Kenya closed as the top five NSE firms by market capitalisation last year, with an average valuation of Sh1.18 trillion in the last three months of 2024 as the overall market cap closed at a mean of Sh1.85 trillion in the same period.
The diversification by investors away from the top five counters is captured among the most traded counters of 2024 data where the market leaders consisted of stocks with relatively lower market capitalisation.
Bamburi Cement, for instance, was the most traded counter in the final three months of the year with an average turnover of Sh7.5 billion in the quarter amid the firm’s buyout by Tanzania conglomerate Amsons Group.
Other counters with relatively smaller market caps to dominate NSE trading in the same period included Kenya Power, KenGen, and Kenya Re.
Market concentration risks remain on the high side despite the waning top-five dominance as the indicative rate of concentration remains above the 50 percent threshold.
CMA continues to bet on new listings to limit the risk posed by the market dominance as the additions expand investor options.
“The public offers listing and disclosure regulations of 2023 were gazetted in the fourth quarter and they set out more favourable listing requirements that attract a broader range of companies to list on the market,” the CMA added, thereby providing investors with a wider variety of investment choices,” the CMA added.
“Furthermore, the Authority is actively engaged in investor education efforts, emphasizing the importance of diversification and promoting long-term investment strategies. By empowering investors with knowledge and information to make informed investment decisions, the aim is to reduce the inclination to concentrate investments in a limited number of dominant companies.”
The NSE has struggled to deliver equity initial public offers (IPOs) in recent years with the last such addition coming in October 2015 when Stanlib Fahari real estate investment trust floated 625 million shares at Sh20 per unit.
The bourse has further taken a hit from delisting including the recent departures of KenolKobil, National Bank of Kenya (NBK), and the ILAM Fahari i-Reit.
