Capital Markets

Stock market gains Sh16 billion to halt decline

nse

Nairobi Securities Exchange (NSE) on the trading floor at the Exchange building in Nairobi on August 26, 2020. PHOTO | SALATON NJAU | NMG

The Nairobi Securities Exchange (NSE) on Tuesday halted a 10-day slide with a Sh16 billion jump in investor wealth, backed mainly by gains on the EABL and Safaricom stocks.

The bourse closed the day with a market capitalisation of Sh1.836 trillion, up from Sh1.820 trillion on Monday, the first such gain since June 10.

EABL rebounded Tuesday with a price gain of nine percent, closing at Sh119.50 compared to Monday’s Sh110.

This saw it add Sh7.5 billion to its market cap, while Safaricom added Sh8 billion after recording a gain of one percent or Sh0.20 to close at Sh23.35 a share.

EABL and Safaricom, alongside Equity Holdings and KCB, carry the biggest weight at the bourse together accounting for 70.5 percent of the NSE’s total investor wealth.

The two stocks gained on the back of demand by local institutional investors as foreigners continued to sell off stock, indicating that locals might be starting to eye a few stocks for entry after weeks of share price erosion.

“The benchmark indices recorded upward trends with the NASI up 0.87 percent and NSE 20 up 0.96 percent to close at 117.9 and 1,578.71 points respectively,” said investment bank AIB AXYS Africa in a market note.

“Foreign investors were net sellers, recording net outflows of Sh146 million as compared to net outflows of Sh175 million in the previous session. In terms of company-specific foreign activity, Safaricom, EABL and Equity Holdings were a net sellers.”

These four large blue chips have been the mainstay of foreign investor trading at the NSE, given that they have the necessary liquidity to support large trades and are backed by solid fundamentals, including consistent profitability and dividend payouts.

There remains a concern however over foreign capital outflows from frontier bourses like Kenya’s to western markets where interest rate hikes have made investment in bonds attractive.

Economies like the US have been raising their interest rates in response to surging inflation—trying to control demand and consumption.

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