NSE data shows foreign investors cashed in on the higher share prices last year
In contrast, 2016 had only 12 stocks gaining value, with 53 in the red in what turned out to be a bruising year for investors in stocks.
Their net outflows of Sh12.2 billion were an indicator of profit taking, having bought heavily during the bear run from March 2015 to March 2017.
Investors holding bank and telecommunication (Safaricom) #ticker:SCOM shares at the stock market had the biggest cheer at the end of last year as these segments returned a double-digit growth to earn them additional billions in paper wealth.
The full year 2017 market statistics compiled by the Nairobi Securities Exchange (NSE) and Standard Investment Bank (SIB) also show that foreign investors were keen to cash in on the higher share prices.
Their net outflows of Sh12.2 billion were an indicator of profit taking, having bought heavily during the bear run from March 2015 to March 2017.
There were 40 counters — including the Stanlib Reit and Barclays NewGold ETF — that gained at share price last year compared to 22 that shed value and thee unchanged, the latter including the suspended Atlas Industries, Kurwitu Ventures and Sameer.
In contrast, 2016 had only 12 stocks gaining value, with 53 in the red in what turned out to be a bruising year for investors in stocks.
“Equity markets, counter-intuitively for many who assume in an election year the stock market normally dives, produced the best returns last year…2017 was the year the stock market staged a big rebound,” says Aly Khan Satchu, an independent analyst.
As a result, the NSE All-Share Index was up 28.4 per cent during the year, while the NSE 20 share index rose 16.5 per cent.
Other indicators were positive as well. The traded turnover in the market for the year rose by Sh24.3 billion to hit Sh171.4 billion, while the market capitalisation which measures investor wealth was up by Sh590.2 billion to Sh2.52 trillion.
Leading the recovery were bank stocks, where nine of the 11 listed lenders made double-digit share price gains in percentage terms in the 12-month period.
The banking segment as a whole saw its market capitalisation rise by Sh166.5 billion to Sh665 billion, even as the sector remains under pressure due to the rate cap on customer loans that has put pressure on earnings.
Safaricom gained 40 per cent last year, the telco is one of the few companies that defied the bear run due to impressive financial performance and appetite for the stock by foreign and local institutional investors.
Its price rose to Sh26.75 at the end of December from Sh19.15 in January 2017, raising the firm’s market capitalisation by Sh304.5 billion to Sh1.07 trillion.
Safaricom CEO Bob Collymore shares a cake with the telco’s customers at Tuffoam Mall regional office in Kisumu Town on June 6, last year. FILE PHOTO | TONNY OMONDI | NMG
Good performance
Other sectors that returned a good performance overall included commercial and services, whose capitalisation rose by Sh98 billion to hit Sh142 billion, largely on the back of the gains on the Kenya Airways share, which was up from Sh5.85 to Sh17.15, even as the company injected billions of shares after a debt restructuring deal.
The energy segment gained Sh21.7 billion to Sh120.6 billion, helped by KenGen #ticker:KEGN whose share price rose by 47.4 per cent in the period to Sh8.55.
This year, attention will largely remain on the banking stocks, with investors watching how the lenders are affected by new accounting rules and the possible revision of the rate cap law.
The same applies to insurers, who are also working under revised accounting rules.
Nairobi Securities Exchange vice chairman Bob Karina, Kenya Airways CEO Sebastian Mikosz, NSE CEO Geoffrey Odundo and Kenya Airways acting finance director Hellen Mwariri at the bourse on November 29, 2017. FILE PHOTO | SALATON NJAU | NMG
Banks globally are expected to adopt the International Financial Reporting Standard 9, effective this month, switching from the 13-year old International Accounting Standard 39.
“The new standard requires banks to set aside funds in advance to mitigate loan defaults, which would increase expenditure, and thus affect their profit margins,” says Neha Datta, investment consultant and risk manager at Zamara — formerly Alexander Forbes EA.
“In addition to the new accounting standard, there is still the anticipation of an amendment of the interest capping law which should have a positive impact on banks’ profit margins.”
Important factor
The performance of the economy will also be an important factor in determining whether the bourse will continue to see a recovery.
The reduced political noise after the conclusion of the General Election should help bring back confidence in the economy, although there could be headwinds due to lingering food security issues.
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