Bonds turnover at the Nairobi Securities Exchange (NSE) went up 28 percent in February compared to January as investors looked for safety in government paper when turbulence hit equity markets due to the negative effects of coronavirus outbreak.
Investors traded bonds worth Sh47.6 billion during the month, compared to Sh37 billion in January.
The traded turnover in the first two months of the year though lags the same period in 2019, when bonds worth Sh99.2 billion were traded. In February 2019, bonds turnover stood at Sh48.26 billion reflecting far worse poor fortunes for equities.
Analysts said the flight to safety last month was not just seen in the Kenyan market, as global equities felt the heat of the coronavirus outbreak that has threatened performance of companies across the globe.
The scare has disrupted supply chains and weakened demand for goods and services worldwide, raising the spectre of a substantial reduction in global economic growth.
“The NSE was not immune to the sell-off as investors’ risk antennas shot-up. With the bleeding in developed markets, investors may seek to reduce exposure on equities in a capital preservation drive supporting further losses for the local stocks,” said analysts at NCBA in a weekly report.
The bulk of the trades came in the last week of February, coinciding with the sharp fall in equities prices as the coronavirus fears escalated in Kenya.
During the week ending February 28, Sh16 billion worth of bonds were traded, up from Sh11.33 billion the previous week. In the first two weeks of the month, trades stood at Sh11.26 billion and Sh9 billion.
The equities market had a bruising ending in February, with the NSE 20 Share Index closing the month at a 16-year low of 2,337 points as foreign investors led a sell-off of blue chip stocks.
On the other hand, government securities have continued to offer a consistent return, with the local yield curve hardly deviating from the range of 7.32 percent for the shortest-term security (91-day-Tbill) to 13.6 percent for long terms bonds.
The stability in the yields is partly due to the rejection of bids that the Central Bank of Kenya deems to be expensive in primary sales — that’s is those exceeding the yield curve on the higher side.