NSE monthly equities turnover at year-low

Monthly traded turnover at the Nairobi Securities Exchange (NSE) fell to a one-year low of Sh10.44 billion in August, as depressed share prices discouraged selling.

NSE data shows that the value of shares traded last month fell by 22.4 percent compared to July’s Sh13.5 billion, and is also the lowest monthly volume since August 2019, when Sh8.7 billion shares were transacted.

The stock market has endured a tough year, largely due to the negative effect of the Covid-19 pandemic on companies’ performance, which has translated to lower share prices as investors factor in the reduced profitability.

The low share prices discourage selling, as those doing so would likely be taking on a loss.

In August, there was also a reversal in the selling activity by foreign investors—who have underpinned trading activity at the bourse this year— with the current valuations especially on bank stocks attractive for entry.

“Foreign investors turned net buyers during the month, with a net buying position of $1.8 million, compared to July’s net selling position of $49.8 million,” said Cytonn Investments analysts in their monthly market summary for August.

“The market is currently trading at a price to earnings ratio (P/E) of 9.5 times, 27.3 percent below the 11-year historical average of 13 times. The average dividend yield is currently at 5.1 percent, which is one percentage point above the historical average of four percent.”

BEST MONTHS

However, even as the market saw it lowest monthly turnover in a year, the total traded volume for the first eight months of the year is still ahead of last year.

The NSE data shows that the turnover for the eight months stands at Sh106.9 billion, which is 7.7 percent higher than the Sh99.3 billion traded in the first eight months of 2019.

The best performing months this year is March at Sh19 billion, which was right before the Covid-19 restriction measures put the economy in a bind.