Capital Markets

NSE sheds Sh89bn in the first week of fresh Covid curbs

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Summary

  • The market capitalisation reduced by Sh89.38 billion, closing Thursday trading at Sh2.468 trillion.
  • NSE was on an upward, having hit a 15-month high of Sh2.598 trillion on March 23 but the roll-out of State restrictions hurt prospects of various sectors

Nairobi Securities Exchange (NSE) stocks posted the largest weekly loss since the start of the year as investors reacted to fresh lockdown and longer curfew hours introduced to stem the spread of Covid-19 infections.

The market capitalisation reduced by Sh89.38 billion, closing Thursday trading at Sh2.468 trillion as Safaricom #ticker:SCOM, East Africa Breweries Limited #ticker:EABL (EABL) and the big banks led in shedding value.

Safaricom, Equity #ticker:EQTY, EABL and Cooperative Bank #ticker:COOP shares—which account for 77.6 percent of total NSE wealth— fell by between 4.4 percent and 12.1 percent, collectively losing by Sh92.86 billion.

The fall in share prices was in line with analyst’s expectation that investors were going to price in the implications of stiff Covid-19 control measures on the outlook of sectors such as banking, manufacturing, hospitality, transport and communication.

NSE was on an upward, having hit a 15-month high of Sh2.598 trillion on March 23 but the roll-out of State restrictions hurt prospects of various sectors, diming attractiveness of stocks.

Head of research at Genghis Capital Churchill Ogutu last week said the return of strict Covid-19 control measures in absence of any stimulus package such as tax cuts to soften the hit on businesses will see large stocks take a hit as foreign investors exit.

“The open-ended nature of these restrictions raised the layer of uncertainty for investors. We also haven’t seen any fiscal measures accompanying these resections to help absorb the shock and this makes the outlook bleaker,” said Mr Ogutu.

The market was basking in the excitement of dividend payouts as firms upped their optimism level in the economy.

Safaricom, KCB, Co-op, Stanbic and Stanchart had all announced a combined Sh32.53 billion dividends, with that of banks coming in six trading sessions to the day the State rolled out the tough measures.

President Uhuru Kenyatta last Thursday ruled out tax reliefs for all workers and businesses despite enforcing fresh Covid-19 restrictions that are set to lead to job losses and depressed earnings for Kenyans.

The Head of State said that tax reliefs, if any, will only be given to specific sectors and the five counties— Nairobi, Kiambu, Machakos, Kajiado and Nakuru—that are under travel bans.

President Kenyatta on March 26 ordered the closure of all bars and liquor selling joints, banned social gatherings, closed churches and banned travel into and out of the five counties.

The curfew hours in the five counties were also increased to start from 8pm and end at 4am in moves expected to hurt revenues for businesses that have reduced operating hours. Domestic flights were also suspended, among other stringent measures for hotels.