Safaricom drops below Sh17 for first time in three weeks
What you need to know:
The share was expected to head north after the company announced a 38 per cent increase in profit last week and launched its own TV set-top boxes.
The stock is said to be going through a recovery process as its performance had already been factored in before it released its financial results.
Depreciation of the shilling and rise in cost of goods has fanned expectations of higher interest rates, which have the effect of propping the currency and reining in inflation.
Safaricom has dropped below Sh17 for the first time in three weeks on foreigners selling off and investors eyeing higher money market interest rates.
The telco Monday traded at Sh16.90 down from Sh17.05 in the previous session. The share was expected to head north after the company announced a 38 per cent increase in profit last week and launched its own TV set-top boxes.
“Safaricom experienced notably high foreign investor selling for the fourth straight session, 95 per cent of sales, leading the telco to decline a further 0.9 per cent,” said Standard Investment Bank.
The stock was said to be going through a recovery process as its performance had already been factored in before it released its financial results.
“The company has been trading at a premium of about 40 per cent so there is a component of price discovery. There is also a lot of capital movement with expectations of hike in interest rates,” said Eric Munywoki, an analyst with Old Mutual.
Depreciation of the shilling and rise in cost of goods has fanned expectations of higher interest rates, which have the effect of propping the currency and reining in inflation.
Mr Munywoki said Safaricom was feeling the impact of investors exiting the equity market.
The counter traded 10,926,100 shares Monday. The indicative 20 share index lost 28.23 points to close at 5,042.52 points. Data from Central Bank showed high appetite for short-term bills underlining investors’ expectations of a rise in interest rate.
Mr Munywoki noted there is low demand for the long-term paper as investors expect further rise in rates and do not want to lock their cash at current rates.
Losing counters
Other counters on the losing end included brewer EABL and Kenya Power.
Johnson Nderi, a corporate finance and advisory manager at ABC Capital, said Safaricom would rebound following increased information flow to investors.
“Typically it takes a beating after announcing results but over time it is set to go up. After they announce results they go for investor road shows and it picks after that,” said Mr Nderi.
