Capital Markets

Small caps do better for second month running


L-R: Nairobi Securities Exchange CEO Geoffrey Odundo, Prafulchandra & Brothers Limited director Mukesh Desai and CEO Kalpesh Desai during the firm’s Ibuka hosting ceremony at the bourse March 4, 2020. PHOTO | DIANA NGILA | NMG

Small-cap stocks at the Nairobi Security Exchange (NSE) were for the second straight month the best performing at the bourse in terms of price appreciation as investors continued to hunt for bargain, market data shows.

The gains though were less pronounced than in January as the market felt the effects of investor caution due to the fears of the coronavirus (since named Covid-19) impact economies.

Data compiled by Standard Investment Bank (SIB) shows only seven firms recorded price gains last month at the bourse, of which only Standard Chartered #ticker:SCBK (up 1.3 percent in February) is in the top 20 by market capitalisation.

The list of top gainers was led by Express Kenya #ticker:XPRS, which was up 14 percent last month to Sh6.50 a share, followed by Olympia Capital #ticker:OCH with a gain of 11.6 percent to Sh2.50 a share and East Africa Portland Cement #ticker:PORT that gained 9.6 percent to Sh14.25.

All these gains were made on the back of very thin traded volumes of less than Sh300,000 on each counter.

In January, six the top-10 gainers at the bourse were firms with a market capitalisation of less than Sh5 billion each.

The small-cap counters at the NSE that were on the top-gainers list did so exclusively on the back of local investor trading, with foreign participation at zero percent.

This may have offered them protection from the negative effects of the foreign selling that characterised the market last month, and which was a major reason for the price slide in large cap counters.

Foreign investors sold a net of Sh2.7 billion last month, reversing the net inflows of Sh540 million recorded in January.

The foreign investors, who mainly trade on blue chip stocks, accounted for 62.8 percent of traded turnover that stood at Sh12.4 billion at the NSE last month.

Their selling activity therefore saw 19 of the 20 constituent stocks of the NSE 20 share index (with StanChart the only exception) record a price decline pulling the index down by 10 percent during the month.

Foreigners prefer large caps due to high liquidity.