Investor wealth at the Nairobi bourse has slipped back from its record high valuation of Sh3.044 trillion, after investors sold shares in large companies to lock in the profits they booked during the price rally of the first week of the month.
The market closed at a valuation of Sh2.969 trillion on Wednesday, representing a decline of Sh74.5 billion compared to the all-time high that was recorded on November 6.
This was the first time that the NSE had crossed the Sh3 trillion mark, having been on a sustained rally since last year that was boosted this month by positive corporate financial announcements by key companies including Safaricom, Equity Group and Co-operative Bank of Kenya. Increased demand for shares by local investors also boosted the market.
“The retreat can be attributed to profit-taking, especially on blue chip stocks which led the rally. After a strong run-up in prices earlier in the month, some investors likely booked profits by selling off shares, putting downward pressure on the overall market valuation, coupled with portfolio readjustments,” said Melodie Ndanu, an analyst at Standard Investment Bank (SIB).
"Additionally, the global market, especially the US, has seen some volatility over the past few days, due to concerns about hefty valuations on AI stocks and uncertainty around a Federal Reserve rate cut in December. Therefore, there could be some exposure calibration in stock holdings in response to this, coupled with geopolitical and policy developments.”
Banks stocks in particular have been subject to the profit taking, with Equity and KCB seeing their share prices fall back to Sh64 and Sh65.50 from all-time closing highs of Sh69.75 and Sh70 per share respectively on November 7.
This has translated to an erosion in valuation of Sh21.7 billion to Sh241.5 billion for Equity, and Sh14.5 billion for KCB to Sh210.48 billion.
Safaricom closed at a price of Sh29.40 on Wednesday, giving the company a valuation of Sh1.177 trillion, coming down from a three-year high price of Sh30.50 per share seen on November 3, which translated to a valuation of Sh1.221 trillion.
Despite the minor price correction however, the Nairobi Securities Exchange remains on course to beat other asset classes in returns this year, having gained 53.1 percent or Sh1.03 trillion in market cap since the beginning of the year.
This has put it ahead of other assets such as bonds, whose capital gains in the secondary market this year have peaked at about 22 percent.
Meanwhile, interest rates on new bond issuances have fallen to about 12 to 14 percent, down from the highs of between 14.5 percent and 18.5 percent on infrastructure bonds, that were issued in 2023 and 2024.
Rates on Treasury bills have meanwhile fallen to between 7.7 percent and 9.4 percent, from highs of 17 percent in August 2024.
Other financial assets such as fixed cash deposits are paying investors 7.63 percent in annual interest, while those holding dollars as assets have had a flat return, due to the shilling/dollar exchange rate remaining largely unchanged at about Sh129.24 in recent months.
