Bullish performance of large stocks led by Safaricom #ticker:SCOM pushed the Nairobi stock market to a double-digit gain in the second quarter of the year, although analysts warn a peaceful election is key to sustaining the performance to yearend.
The #ticker:NSE 20 share index was up by 15.9 per cent in the three months to the end of June while the All Share Index gained 17.2 per cent. Market capitalisation grew by Sh327 billion in the period.
Data compiled by Standard Investment Bank shows that 17 out of the 20 largest companies by capitalisation at the NSE recorded share price gains in the quarter, 13 by double digit in percentage terms.
“Kenya was up as local and foreign investors responded to better- than- expected results from bellwether Safaricom (driven by data and M-Pesa) took a sanguine approach to risks related to the August 2017 election and the forex rate outlook and hoped for a dilution, post-election, to the rate cap law which has throttled credit growth,” said Exotix Partners analyst Hasnain Malik.
The market was also kind to foreign investors with the NSE’s dollar returns measured on the MSCI Index hitting 23 per cent in the second quarter, third highest in Africa after Zimbabwe (40 per cent) and Nigeria (30 per cent).
Safaricom was the top gainer among the top 10 firms between March and June with a price increase of 26.4 per cent in the quarter to Sh22.75, followed by Barclays at 25.1 per cent to Sh9.95 and Cooperative Bank at 21.5 per cent to Sh16.95.
Analysts however say that the key to maintaining this performance will be a peaceful election—any other outcome would spook investors and send them back into a defensive position.
“While there is reason to be optimistic regarding the recent improvement seen in stock prices it is important to note that a troubled election can have lasting effects on equity prices,” say analysts at Stratlink Africa, a risk and research firm.
“The NSE 20 Share index’s average yearly level fell by 12.8 per cent in the year following the violence-marred 2007 elections whereas it experienced gains of 73 per cent and 4.8 per cent in the years succeeding the relatively peaceful 2002 and 2013 elections, respectively.”