NSE valuation nears Sh3trn milestone as shares surge

The NSE has posted a return of 54.2 percent since the start of the year, beating other asset classes such as bonds, real estate and fixed bank deposits.

Gains in blue chips, including Safaricom, Equity and KCB, are behind the surge in the market valuation as small caps like Sameer Africa, Home Afrika and NSE have chalked gains of 572 percent, 253 percent and 244 percent, respectively.

Analysts say the 2025 market rally has ridden on the back of lower returns on fixed income assets, including Treasury bills and bonds, forcing investors to seek higher returns in alternative asset classes like equities.

“It has to do with investors turning on risk as interest rates come down. As the returns from fixed income fall, investors seeking higher returns have had to reprofile their portfolios towards equities,” said Wesley Manambo, a Senior Research Associate at Standard Investment Bank (SIB).

Kenya Power has led gains for the NSE’s 20 largest companies by market capitalisation, rising by 122.2 percent in the last six months to Sh14 per share from Sh6.30.

Electricity generating company KenGen has been the second highest growth counter, with its share price jumping 114.7 percent to Sh10.50 from Sh4.89 six months ago.

Other top grossing counters in the period have been NCBA, HF Group, Jubilee, Safaricom and KCB.

Investors’ paper wealth at the NSE has grown by more than Sh1 trillion (Sh1.05 trillion) since the start of 2025, the biggest jump ever.
The top five counters—Safaricom, Equity, KCB , East Africa Breweries Limited (EABL) and NCBA —accounting for 72.8 percent percent of the gains.

Safaricom has gained Sh513.9 billion since the start of the year ahead of Equity (Sh74.4 billion), KCB (Sh65.6 billion), EABL (Sh44.7 billion) and NCBA (Sh66.4 billion).

This reflects the outsized influence of the counters, which makes it difficult to gauge the performance of the NSE.

The Capital Markets Authority (CMA) has raised alarm over the dominance of a handful of counters on the market and has been seeking interventions to ease this stranglehold by the five firms.

“By empowering investors with knowledge and information to make informed investment decisions, it will help reduce the inclination to concentrate investments in a limited number of dominant companies, thus having a more diverse and dynamic market environment which reduces the risks associated with excessive market concentration,” the regulator said in a market soundness report last month.

Investors are taking advantage of long periods of the stock market undervaluation to pile into stocks on the expectation of a recovery and higher gains.

The Nairobi bourse had been on an extended bear run from 2016 to the start of last year, marked with an initial public offering (IPO) drought, the fall of share prices and the exit of foreign investors.

An improved macroeconomic setting, including a low inflation rate and a stable exchange rate, has allowed the government to cut interest rates, dimming returns from the less risky Treasury bills and bonds.

The Central Bank of Kenya (CBK) has cut its benchmark interest rates by 3.75 percentage points since August of 2024, inducing the lower returns on government paper.

Read: Central Bank in eighth straight rate cut to boost uptake of loans

The return from government paper fell from a high of nearly 17 percent for the 364-day paper/one year Treasury bill to 9.3404 percent last week.

The single-digit returns on Treasury bills and bonds have prompted investors to shift and diversify away from the asset class to the stock market.

The NSE is closing in on a Sh3 trillion valuation for the first time ever, ahead of previous forecasts.

The CMA expected the bourse to reach the milestone next year, with the help of the Kenya Pipeline Company (KPC)’s IPO.

The government is seeking to sell a 65 percent stake in KPC in the race to raise Sh149 billion from the privatisation of State enterprises.

“With the listing of KPC, this figure is projected to rise by at least Sh100 billion even before accounting for broader market reaction to such a positive development,” CMA chief executive officer Wyckliffe Shamiah said in June.

“If the initial public offering is successful and investor sentiment remains strong, market capitalisation could exceed Sh3 trillion by the close of the financial year [June 2026].”

The NSE has not had an IPO since the listing of the Fahari Stanlib real estate investment trust (Reit) in October 2015.

Beyond the return of IPOs, company earnings and the availability of disposable cash by investors are expected to sustain the current market rally amid profit taking from stock sales.

Safaricom, the largest firm on NSE, is expected to influence the market, with its corporate performance linked to its exploits in Ethiopia.
Bank stocks are also a big factor in driving the market, and analysts expect their profit and dividend outlook to continue powering the NSE.

“For as long as there is liquidity in the market, demand for stocks will always outstrip supply, sending share prices higher,” said Mr Manambo.

Local institutional and individual investors have been the major drivers of the NSE market recovery, which began in 2024, as foreign investors largely sit out.

The allure of relatively higher returns from buying equities in advanced markets such as the US, the United Kingdom and Japan have seen the offshore investors ignore the more than 50 percent NSE gains.

The global equities market has remained potent in 2025, supercharged by artificial intelligence (AI) as the largest firms become vendors and buyers of AI infrastructure in a race for automation of everyday tasks such as computer programming, sales and even driving.

The US market observed the third-year anniversary of its current bull run in October this year, with the global rally minting multi-trillion-dollar companies like Nvidia, Microsoft and Apple.

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