Stocks listed on the Nairobi Securities Exchange (NSE) lost Sh80.02 billion of their value yesterday as foreigner sold off shares in blue-chip firms over the new lockdown, making it one of single-largest drops in a day in the bourse’s history.
The market capitalisation closed at Sh2.47 trillion compared to Sh2.55 trillion on Friday, with Safaricom, East Africa Breweries Limited (EABL) and the big banks leading in shedding value in the wake of the sell-off.
The blue-chip stocks are a favourite of foreign investors who over the past few weeks have been buying shares at the NSE, pushing the value of the bourse to pre-pandemic levels.
The fall in share value was the steepest in a single trading day in 11 months, a signal that investors believe that the new round of curbs, including extended curfew and the closure of bars, would hurt the economy.
Safaricom, Equity, EABL, KCB and Cooperative Bank shares—which account for 79.8 percent of total NSE wealth— fell by between 2.96 percent and 8.51 percent, collectively cutting the market capitalisation by Sh74.51 billion.
President Uhuru Kenyatta on Friday afternoon restricted travel in and out of the Nairobi and four surrounding counties of Kajiado, Machakos, Kiambu and Nakuru as Covid-19 infections hit record levels in Kenya.
Analysts reckon the new Covid-19 restrictions were announced at the tail end of trading, denying investors the opportunity to fully price stocks.
"Investors are reacting to the Friday’s announcement since the timing of the announcement denied them immediate response," said Sarah Wanga, the AIB-AXYS Africa head of research.
"We saw a lot of foreign sales on a number of large counters as they priced in what the State’s restriction means to various sectors. Investors had the entire weekend to digest the news and are therefore taking thought-out positions."
Under the new curbs, the five counties would be treated as one zone, and residents would be barred from crossing over to other areas. Public gatherings in the zone were suspended and curfew hours increased to eight hours from the previous six starting 8 p.m. In-person schooling, apart from for students taking exams, was suspended across the country.
The closure of bars looks set to hurt EABL sales. A second wave of job losses and pay cuts across sectors could also set in, leading to a cash flow hitch that will trigger loan defaults and reduced purchase of airtime, affecting banks and Safaricom.
Head of research at Genghis Capital Churchill Ogutu says the return of strict Covid-19 control measures in the absence of any stimulus package such as tax cuts to soften the impact 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 quarterly portfolio rebalancing by local and foreign institutional investors in line with the earnings they are seeing could also be at play."
Equity — second largest stock after Safaricom — took the heaviest beating among the top five counters, losing 8.4 percent to close at Sh37.55 on the day it posted a decline in profit and withheld dividends for the second year running.
Mr Ogutu said the decision by Equity to skip dividend payout for the second year in a row contributed to the sharp decline.
The return of strong Covid-19 controls has raised the risk of layoffs, echoing the employment market of between March and June last year when 1.72 million jobs were lost when the government imposed similar measures.