NSE investors hope for a turnaround after bear run
A trader looks at a board displaying EABL’s stock trade price in May. The brewer’s market capitalisation has dropped by Sh30 billion since February. PHOTO | FILE
Investors will be praying for a better year after only 10 out of the 61 actively traded Nairobi Securities Exchange (NSE) counters registered gains in 2015, effectively wiping out Sh263 billion in paper wealth.
Share prices tumbled across the board, ending a three-year bull run that started January 2012 to February 2015. The run had brought with it a stunning increase of Sh1.44 trillion in market capitalisation at the NSE, from Sh868.24 billion to Sh2.45 trillion.
Billionaire investors such as Jimnah Mbaru (Britam), Peter Munga (Britam, Equity), Chris Kirubi (Centum), Pradeep Paunrana (ARM), James Mwangi (Equity, Britam) and Jane Michuki (Britam) saw their portfolios shrink by billions on paper due to the poor performance of blue chip shares in banking, services, investments, insurance and manufacturing.
Baloobhai Patel, who has holdings in companies such as Carbacid, Pan Africa Holdings, Barclays Kenya and DTB Bank has also seen sizeable paper losses.
“A number of issues undercut the bull market. The Capital Gains Tax, for example. The shilling’s weakness—and foreign exchange impairments have been a common theme running through the record-breaking profits warnings this year— was also not helpful. Then of course the dramatic spike in interest rates was not helpful,” said Aly Khan Satchu, head of advisory and data vending firm Rich Management.
The market has been characterised by foreign investor exits. These investors had been pulled to the Kenyan market by attractive market valuations compared to the historical averages and relative to peer markets, suggesting that their consequent selloff has also been motivated by profit taking.
Since January, the benchmark NSE 20 share index has shed 22.7 per cent, putting it in the bear market category that is defined by a decline of more than 20 per cent from the previous peak.
The banking segment recorded the largest capitalisation decline for the year at Sh216 billion, followed by manufacturing (Sh51 billion) and insurance (Sh43 billion).
KCB has the biggest cap decline at Sh52 billion, followed by Standard Chartered (Sh41 billion), Equity Bank (Sh36 billion), Britam (Sh31.2 billion) and EABL (Sh30 billion).
It is the smaller counters however that have shown the biggest percentage decline in prices. Atlas Development led with an 86 per cent fall in share price, followed by TransCentury at 64 per cent and Longhorn at 57 per cent.
Athi River Mining and Britam have both shed 54 per cent, with HF Group and Home Afrika losing 53 and 52 per cent respectively in the share price.
There have been precious few winners in the stock market this year. Safaricom has thus dominated the market with a share price gain of 19 per cent that has translated to a market cap increase of Sh106 billion.
Agriculture stocks have also weathered the storm, largely helped by their illiquidity and the attraction of the potential value of their land holdings.
Analysts have sounded cautiously optimism on the prospects of a recovery in the coming year given the market will be in tighter competition with fellow bourses for inflows following the US Federal Reserve rate increase.
“Any turnaround will also be contingent on individual companies improving their performance. The bearish run had been majorly brought on by the poor financial performance of companies,” said ABC Capital corporate finance manager Johnson Nderi.
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