The Nairobi Securities Exchange (NSE) has rebounded from a dreadful first half of 2022 as easing rate rise expectations in the US and scramble for falling stocks fuelled a rally in July.
Market capitalisation increased by Sh259 billion in July to Sh2.198 driven by local investors snapping shares dumped by foreigners that shifted capital to safe havens abroad.
The strong performance in July is a contrast to the first six months of the year when foreign investors' flight saw the market shed Sh653 billion in paper wealth.
Multiple stocks fell to 52-week lows, ushering in a buyers’ market where there were attractive entry prices offering good dividend yields and potential for capital gains once the market corrected itself.
Stocks of leading blue-chip counters including, Safaricom, Equity Group, KCB, and East Africa Breweries Limited have driven the rally as local investors pick up cheap stocks that had slumped on foreign investor exits.
“Foreign investors are still recording net outflows, which has provided a steady supply for local investors looking to get into the market, hence the rise,” said Melodie Ndanu, an analyst at Genghis Capital.
The market was weighed down by a reduced appetite for emerging markets after a jump in interest rates in the developed markets such as the US, which are currently battling high inflation that has forced their central banks to adjust rates upwards.
On Thursday, data showed the US economy had contracted for a second consecutive quarter, sparking hopes that the worst inflationary cycle for four decades would moderate and that the Fed may slow its policy tightening.
“Investors are also betting that much of the negative [economic] news has been priced in, that the Federal Reserve could become less aggressive in tightening monetary policy, and there’s enthusiasm in equity markets for slower inflation and fewer rate hikes,” a fund manager told the Financial Times on Friday.
Safaricom shares have gained 20.28 percent over the month to Sh29.96 at the close of trading last Friday.
The telco suffered one of the worst routs in the market that saw it slump to Sh23.01 in June and made the counter that has sustained profitability over the years very attractive.
EABL has gained 22.24 percent to Sh155.25 on the back of news that it will pay an additional Sh7.25 per share or an aggregate of Sh5.73 billion in final dividends after it more than doubled its net profit to Sh15.57 billion in the full-year ended June
Equity share is up 22.24 percent while KCB rose 9.59 percent.
Analysts said with elections coming up the market will most likely tread carefully until the outcome is clear and the country can start to work through its macro-economic challenges.