Capital Markets

NSE hits 34-month high on Safaricom, banks


Nairobi Securities Exchange trading floor. PHOTO | NMG

The value of investor wealth on the Nairobi Securities Exchange (NSE) hit a 34-month high of Sh2.62 trillion Thursday, lifted by a rally of the share prices of Safaricom #ticker:SCOM, East African Breweries #ticker:EABL (EABL) and banks.

The Thursday upturn saw investors Sh197 billion richer compared to a month ago when the market closed at Sh2.423 trillion on strong support from the KCB #ticker:KCB, Cooperative Bank #ticker:COOP and Equity #ticker:EQTY counters.

The gains by Safaricom, Equity, EABL, KCB and Cooperative Bank stocks -- which now account for 81 percent of total investor wealth on the NSE -- have raised the bourse to levels last seen on June 18, 2018 when the market closed at Sh2.62 trillion.

The five stocks have gained a combined Sh210.21 billion between April 8 and yesterday, aiding the market rise.

Analysts linked the rally to positive investor sentiment following the lifting of month-long curbs on travel and longer night curfews in Nairobi and four surrounding counties to control the spread of Covid-19.

Investors are also upbeat about Safaricom posting improved full-year results and its prospects of getting a licence to operate in Ethiopia. The bank stocks have, for their part, been buoyed by the fact that the sector’s combined quarter one pre-tax profits jumped 19.5 percent to a record Sh45.9 billion, signalling a steady recovery from the Covid-19 induced economic downturn.

“This is mostly to do with the increased positive sentiment following the continued fall in new Covid-19 infections and the relaxation of control measures. Investors are expecting activities to pick up,” said Sarah Wanga, AIB-AXYS Africa head of research.

The Safaricom share closed yesterday at Sh40.65, compared to Sh36.15 on April 8, taking its market capitalisation to Sh1.628 trillion.

This means that the Safaricom share has added Sh180.29 billion in the review period, partly helped by investors’ rush to buy on news that the telecoms operator could be close to securing an operating licence in Ethiopia.

“Foreign investors have come in strongly and are locking in Safaricom on Ethiopia news as well as the expectation that the telco will keep up with dividend payment,” said Churchill Ogutu, Genghis Capital senior research analyst.

The Ethiopian Communications Authority last week confirmed that a consortium led by Safaricom and another one by South Africa’s MTN Group were the only parties to make bids in the auction for two operating licences.

EABL, KCB, Equity and Co-op bank stocks have also joined in the rally, adding Sh29.9 billion in investors’ pocket as share prices jumped by between 4.2 percent and 7.5 percent.

“The improved economic sentiment points to potential loan growth and lower defaults leading to profitability. For EABL, bars are reopening and so the sales of alcohol are likely to increase,” said Mr Ogutu.

The EABL share has gained by Sh0.25 since the State lifted the ban on operation of bars last Saturday and closed yesterday at Sh171.25.

President Uhuru Kenyatta on May 2 lifted the partial lockdown, allowing for a reopening of bars and restaurants, religious services and schools as the rate of infections eases. The night curfew was also revised to start from 10pm.

Under the restrictions imposed in March but have since been relaxed, Nairobi and the surrounding counties of Kiambu, Machakos, Kajiado and Nakuru were treated as one zone, with residents barred from travelling to other areas.

The State also extended the night-time curfew in the zone by two hours starting from 8pm to contain the third wave of Covid infections. It further suspended in-person schooling and church services, closed bars and restricted restaurants to take-away services.

The restrictions darkened the job market conditions in April as private firms cut jobs for the first time in seven months on reduced orders.

The NSE was enjoying tailwinds of a Sh32.53 billion dividend payout by Safaricom, KCB, Co-op, Stanbic and Stanchart but this had been paused late March when the State tightened coronavirus control measures.