Safaricom record rally lifts NSE to an 11-month high

The Safaricom share yesterday touched a new all-time of Sh35.10, pushing the combined wealth of investors at the Nairobi bourse to levels last seen 11 months ago and brightening prospects of recovery from Covid-19-induced price plunges.

The jump in the Safaricom share from Tuesday’s Sh34.90 continues a rally that set in from the beginning of the year, after the Central Bank of Kenya (CBK) ended a waiver on fees for transferring up to Sh1,000 on the M-Pesa platform.

Wednesday’s rally helped to add Sh8.013 billion in paper value to the Nairobi Securities Exchange (NSE), sending the combined investor wealth—called market capitalisation—to Sh2.373 trillion.

The latest level of market capitalisation translates to a Sh37.25 billion gain since the first trading session in the New Year and is also the highest since February 25 when it was at Sh2.396 trillion.

Year-to-date the Safaricom share has added Sh0.85 or total value of Sh34.055 billion. This means that it accounts for 91.4 percent of the additional wealth at NSE in the New Year so far.

The Safaricom gain has come alongside that of Cooperative Bank of Kenya and Equity Group, whose market value has risen by Sh2.93 billion and Sh1.7 billion respectively.

The telco, alongside Co-op, Equity, KCB Group and East African Breweries Limited, account for 78.5 percent of all the investors’ wealth at the NSE.

ICEA Lion Asset Management said yesterday in its outlook for the equities that it sees a strong upside potential in the banking stocks as fundamentals in the economy improve.

“The feedback we are getting from banks is that a significant number of customers were beginning to repay loans earlier than expected as cash flow improves,” it said.

“Reduced loan loss provisioning and rebound in loan payments promises to strengthen the fundamentals of the sector.”

Eyes will be on whether NSE gain will sustain the rally and turn the corner on the Covid-19 disruptions that saw the combined investor’s wealth shrink by Sh203.7 billion last year.

Total market value as measured by market capitalisation declined to below the Sh2 trillion mark when the pandemic hit Kenya, but recovered slightly, to close the year at Sh2.336 trillion.

NSE chairman Kiprono Kittony last week said that bourse expects the recovery to continue this year, hinged on the return of foreign investors, improved business environment and the attractive prices of many stocks.

“We expect increased foreign investor flows because of the recent upgrade on the Morgan Stanley Capital International (MSCI) emerging markets index which gives Kenya increased allocation due to higher weighting,” Mr Kittony said.

The MSCI, the world’s largest market index provider, in November started phased reclassification of the Kuwait stock market bourse — which currently accounts for more than a quarter of frontier markets index — in a year-long process through five stages.

This shift means that Kenya’s weight in the index will increase to 9.49 percent from about 8.2 percent after Kuwait fully exits.

Foreign investors account for about 70 percent of NSE trading activities and their interest in large capitalisation stocks has traditionally seen their activities dictate the direction of the market.

The NSE will become the fourth most important frontier market in the global listing after the biggest gainer Vietnam (28.76 percent), Romania (12.47 percent) and Morocco (10.26 percent).

Foreign investors last year withdrew a record Sh29.01 billion from the NSE in contrast with Sh1.378 billion added the previous year as they dumped equities in a Covid-19 environment.

All the three indices—NSE 20, NSE 25 and NSE all share—were down 30.2 percent, 17.4 percent and 9.3 percent respectively.