Investor wealth as represented by market capitalisation retreated to Sh2.706 trillion by close of trading last Thursday against this year’s peak of Sh2.896 trillion reached just over two weeks ago.
Brokerage houses attributed the correction to heavy sell-off by foreign investors, who were taking profits on counters that have chalked up significant gains in recent months.
Analysts particularly pointed to mass exits from counters such as Safaricom.
Investors in companies listed on the Nairobi Securities Exchange (NSE) have lost about Sh191 billion in the past two weeks in what market watchers say is a correction of the aggressive price rally that run through the first three months of the year.
Investor wealth as represented by market capitalisation retreated to Sh2.706 trillion by close of trading last Thursday against this year’s peak of Sh2.896 trillion reached just over two weeks ago.
Brokerage houses attributed the correction to heavy sell-off by foreign investors, who were taking profits on counters that have chalked up significant gains in recent months.
Analysts particularly pointed to mass exits from counters such as Safaricom #ticker:SCOM – which accounts for nearly half of the market by capitalisation.
Equity Bank #ticker:EQTY was also mentioned as one of the counters facing exits last week. Five other banks have also been undergoing a price correction in the past two weeks.
“[Foreigners] were … exuding net selling interest in Safaricom. Foreign investors were net sellers for the fourth consecutive session in a row,” said Genghis Capital in its analysis.
Foreigners dominate trade
It added that foreigners dominated to reach 71 per cent of the trades last Thursday, meaning that prices fell with the mass exit of overseas investors from several counters.
“Foreign investors persisted their dominance in the session though at lower rate, 71 per cent of total market participation. The [foreign] desk was mainly active in the top five movers for the day,” said Genghis Capital.
Thursday alone, foreigners’ total outflows exceeded inflows by Sh140 million although this was a lower net outflow compared to the previous day’s Sh160 million.
Standard Investment Bank (SIB) noted that the foreigners were getting out of Safaricom on a net basis for the sixth consecutive session.
“Foreign investors turned net sellers for the fourth consecutive session, recording net outflows of $1.4 million (Sh140 million) — a 15.2 per cent decline from [Wednesday’s] session,” SIB said.
“The telco maintained its top mover position, accounting for 56.2 per cent of total market activity on Thursday” said SIB.
“Equity Bank was the worst performer in the top movers list, shedding 0.2 per cent to close at Sh50.00 on foreign investor selling,” said SIB.
Analysts, however, said that despite the recent correction of the market, the prices of many counters had risen comparing last week with the beginning of the year.
The bourse opened the year with a market cap of Sh2.5 trillion but that has risen to just over Sh2.7 trillion — showing that investors’ wealth has increased.
“What we have seen in these two weeks is a correction in the market. It is a sort of retracement. But looking at it in the context of the year, it is up quite a bit,” said Eric Musau, head of research at SIB.
Long-term performance
Mr Musau said that many investors were still looking at the market with a long-term view expecting better corporate performance this year.
“Most people are not in the market for the short-term and own the shares for the long term. Even with the correction, they will still continue investing,” said Mr Musau.
The economy is estimated to have grown by a modest 4.8 per cent last year compared to the previous year’s 5.8 per cent, but World Bank has projected a rebound this year to 5.5 per cent.
This year, the market cap peaked on April 5 and then began to fall with the decline in prices on large counters – such as Safaricom and banks – which hold wealth amounting to 64 per cent of the total market.
Equity Bank lost 8.3 per cent of its market value between the peak day of April 5 and last Thursday while KCB #ticker:KCB and Co-op Bank #ticker:COOP lost 3.7 and 7.3 per cent respectively.
Other banks that lost market value in the past two weeks are National Bank #ticker:NBK, Stanbic Holdings #ticker:CFC and DTB #ticker:DTK.
The list of banks that defied the two weeks fall in share prices included HF Group #ticker:HFCK, I&M Holdings #ticker:I&M NIC Bank #ticker:NIC and Standard Chartered #ticker:SCBK.
Sector performance
Market correction was also witnessed on the Commercial and Services sector with eight of the 13 companies listed there seeing a decline in their share prices.
The biggest losers in the sector were the troubled Uchumi Supermarkets #ticker:UCHM and the equally besieged Kenya Airways #ticker:KQ.
Sameer Africa #ticker:FIRE and WPP Scangroup #ticker:SCAN were, however, major gainers in the past two weeks with 10 and 4.3 per cent per cent upward change in prices respectively.
For the Construction and Allied sector, ARM Cement #ticker:ARM has lost 10.5 per cent while East African Cables #ticker:CABL loss stood at 8.2 per cent.
The only gainer in the sector was Bamburi Cement #ticker:BAMB.
On the Manufacturing and Allied sector, not a single counter gained in price.
