The Nairobi Securities Exchange (NSE) defied political turbulence associated with the August election to boost investor wealth at the bourse by Sh445 billion in the first nine months of year.
Latest official data shows that market capitalisation rose to Sh2.376 trillion at the end of September from Sh1.931 trillion at the beginning of the year, mainly driven by appreciation of bank stocks and Safaricom #ticker:SCOM shares.
Stock market investors made the gains against a backdrop of difficult economic conditions, partly arising from a prolonged drought in the first half of the year and political clouds that hang over the economy ahead of the inconclusive August 8 General Election.
The market surge started in earnest at the end of March after a two-year bear run but analysts say political noise has since slowed down the gains.
The September 1 annulment of the presidential poll by the Supreme Court, for instance, shocked the market, causing prices to tumble and half-an-hour stop of trading.
“The stock market started 2017 off a low base and the rally is a little counterintuitive when you consider the slowdown in GDP, the drought and of course politics which has metasized into the elephant in the room,” said Aly-Khan Satchu, an independent analyst.
“It feels very binary. A clean result on October 26 should set us up for a big rally. The flip side would be another messy scenario around October 26 that could pressure the market further.”
Traded turnover at the stock exchange for the nine months of the year rose 11.7 per cent above the same period in 2016 to stand at Sh135.6 billion, helped by increased participation of local investors returning after sitting out the two-year bear run.
The benchmark NSE 20 share index gained 17 per cent in the nine months, ending September at 3,732 points.
NSE data shows that the Safaricom stock added Sh246.4 billion in market capitalisation in the nine-month period to stand at Sh981.6 billion.
The telecoms operator’s share price rose from Sh18.35 to Sh24.50, backed by an investor rush to secure a dividend payout of Sh0.97 a share before books closed mid-last month.
The stock, one of the few that defied the 2015 and 2016 bear run, touched an all-time high of Sh27.25 at the end of August, making it the only NSE-listed firm to have crossed the Sh1 trillion mark in market valuation.
On the banking counters, only mortgage financier HF, whose share price fell five per cent, failed to record a double-digit percentage share price growth in the nine months.
Equity #ticker:EQTY and KCB #ticker:KCB, Kenya’s two largest lenders by market capitalisation, added Sh57.5 billion and Sh54.4 billion respectively in the nine months to stand at Sh146.2 billion and Sh125.7 billion respectively.
Equity and KCB were up 65 and 76.3 per cent respectively to Sh38.75 and Sh41 while Cooperative Bank’s market value rose Sh33.1 billion to Sh100 billion.
Standard Chartered #ticker:SCBK, another big bank, was up Sh22.7 billion to Sh79.4 billion, I&M Bank added Sh21 billion to its market valuation to reach Sh53.7 billion while DTB #ticker:DTK was up Sh20.9 billion to Sh51.7 billion.
EABL #ticker:EABL and KenGen #ticker:KEGN also recorded significant gains, adding Sh23 billion each in market capitalisation to stand at Sh56.7 billion and Sh198 billion respectively at the end of September.
Although banks generally reported lower profits in the first half of the year compared to 2016, analysts said that the impact of interest rate caps that came into effect in September 2016 was milder than expected, setting the stage for share price recovery.
A sustained recovery of the market should make particularly good news for pension savers, whose returns are expected to improve compared to last year.
Pension funds have on average invested about a quarter of their assets in equities, which in 2015 and 2016 caused returns to fall sharply in tandem with the bear market.
An industry survey by fund administrator Zamara (formerly Alexander Forbes) for the first half of this year showed that the average one-year return rose to 13.8 per cent as at June this year, compared to 4.3 per cent in June 2016.
Returns from equities in the year to June 2017 stood at 11.5 per cent, compared to -15.4 per cent in the year to June 2016.