The value of stocks on the Nairobi Securities Exchange (NSE) #ticker:NSE dropped to a seven-month low on foreign investors’ sell-off of blue-chip firms amid rising concerns over new coronavirus variant.
Market data shows investors’ paper wealth declined Sh89.06 billion in a week through Monday, pushing the market value to levels last seen in mid-April.
The NSE market capitalisation — a measure of investors' paper wealth— closed Monday on Sh2.477 trillion pole against nearly Sh2.566 trillion a week earlier, a 3.47 percent fall. This marked the lowest valuation of shares at the NSE since April 15 when it stood at Sh2.459 trillion as the country weathered a third wave of coronavirus restrictions and shutdowns.
Analysts at AIB-AXYS Africa said the off-loading of shares in big firms such as Safaricom #ticker:SCOM Equity #ticker:EQTY KCB #ticker:KCB and EABL #ticker:EABL started weeks ago, adding that the global uncertainty over Omicron strain of Covid has hastened the fall.
Stock markets around the world have fallen after the boss of Moderna cast doubts on the effectiveness of vaccines against the new Omicron Covid variant.
The Covid variant was first detected in South Africa, and the symptoms have been mild so far. But travel restrictions have been imposed as a precaution by places including the UK, the EU and the US.
"Foreign investors are reducing holding in local firms and price for a number of them (blue-chips) has dropped. This is because of development in global markets where investors are moving from what they consider risky assets," Sarah Wanga, AIB-AXYS Africa head of research, said on phone.
"But the companies are strong and looking at the fundamentals, we expect things to correct in the next few weeks largely because of improving economic activity and good third-quarter numbers for banks which will feed into dividends."
Compared to a recent high of Sh2.932 trillion on August 24 —when Safaricom shares were trading at a record high of about Sh45.25 per unit — NSE investors have lost Sh445.60 billion of paper wealth.
Market data shows Safaricom, Equity, EABL, KCB and Co-operative Bank #ticker:COOP counters — which are favoured by foreign investors — lost Sh78.26 billion of their value during the week in review.
The five major blue-chip firms shed values ranging from 2.44 percent to 10.45 percent in the week through Monday at a time uncertainty over Omicron variant of the pandemic has left profit-taking foreign investors on the edge.
Equity Group lost most of the value among the blue-chip stocks in the week, shedding 10.45 percent, or Sh19.81 billion, of investors’ paper wealth.
KCB Group shares fell 5.63 percent, EABL by 3.88 percent, while Co-op Bank stock traded 2.44 percent lower week-on-week. Safaricom, the giant telco whose shares have been routed by rising civil unrest in north-neighbouring Ethiopia where it has recently set up operations, shed 2.89 percent of its value.
"The outflows have been there for several months and they are not necessarily because of the new (Covid) variant. But the new variant has led to risk aversion," Ms Wanga said.
Uncertainty is increasingly growing amongst global investors over the fast-spreading the Omicron strain of Covid which experts say could be less responsive to vaccines.
Scientists are still trying to understand the transmissibility and severity of the new variant of Covid infections which has been confirmed in at least 20 countries, posing the latest pandemic test to the global economic outlook.
As a result, global markets have remained volatile as investors await further clarity on the impact of the Omicron variant which has prompted some countries to reintroduce restrictions.
President Uhuru Kenyatta said on December 1 that Kenya was not looking at re-imposing restrictions which he eased on October 20 and instead rallied Kenyans to take vaccines.
"That shot in the arm is our most powerful weapon against a disease that has ravaged the world. That shot in the arm of every adult Kenyan will also be a shot in the arm for our economy and our social institutions," Mr Kenyatta said.
"It ensures that we can conquer put this disease and fully return to normal."