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Capital markets strong in Q2 despite Corona threat

By Lewis Njoka
Friday, July 30th, 2021 00:00 | 2 mins read
Volatility in the equity markets during second quarter of 2021 remained low supported by renewed investor interest in large cap stocks. Photo/PD/File

Lewis Njoka @LewisNjoka

Kenya’s capital markets remained resilient during the second quarter of 2021supported by positive investor sentiments and steady economic recovery, a report shows. 

In its Capital Market Soundness Report, second quarter of 2021, Capital Markets Authority (CMA) says with the projected 6.6 per cent economic growth this year, it expects a sustained capital markets recovery.

During the period, volatility in the equity markets remained low supported by renewed investor interest in large cap stocks especially telecommunication, banking and manufacturing and allied sectors. 

 “Market infrastructure remained sound during the period under review. The launch of the NSE Unquoted Securities Platform (USP) that facilitates the trading, clearing and settlement of securities of unquoted companies in Kenya further enhanced capital market infrastructure,” CMA said in the report.

Volume of shares

Market capitalisation during the quarter increased 10.9 per cent to Sh2.7 trillion from Sh2.4 trillion the previous quarter. 

All the three NSE indices; NSE 20 share index, NASI and the NSE 25 share index posted growth to stand at 4.4, 9.4 and 6.8 per cent respectively.

During the period under review (April to June), equity turnover increased by 19.7 per cent to Sh38 billion up from Sh31.7 billion the previous quarter. 

Similarly, the volume of shares traded increased by 10.2 per cent to 1.1 billion shares.

Net foreign inflows more than doubled to stand at Sh2 trillion up from Sh976 billion the previous quarter, a 105.8 per cent increase. 

Corporate bond turnover posted a remarkable performance increasing by 306 per cent to Sh358.5 million from Sh88.3 million the previous quarter.

Some key capital market indicators, however, posted negative performance during the period under review. 

Average foreign investor participation reduced to 58.7 per cent down from 60 per cent in the first quarter of 2021while I-REIT turnover reduced by Sh3 billion to Sh7.4 billion, a 28.7 per cent decrease. 

Similarly, Exchange Traded Fund turnover (ETF) declined by 97 per cent to Sh1.5 million from Sh54.2 the previous quarter.

According to CMA, Covid-19 pandemic was, and still is a key risk especially with the renewed waves of infections and new variants occasioning reintroduction of containment measures. 

“While we remain confident with efforts being taken by the government to manage the pandemic, more ground needs to be covered in full vaccinations to enhance productivity to spur capital markets and by extension economic recovery in Kenya,” CMA said in the report.

Country’s economy

The National Treasury projects that this year, the country’s economy will grow at 6.6 per cent.

The prediction is close to that made by the World Bank which estimates that emerging and developing economies will grow at six per cent this year

CMA called for the reconsideration of a bill to give it more powers to check over unregulated capital market products.

This request comes on the backdrop of a public outcry after it emerged investors risked losing billion in an unregulated product offered by Cytonn.

“We are further advocating for reconsideration of the Securities, Investments and Derivatives Bill which will accord CMA more powers over unregulated products and Services,” CMA said.

Lewis Njoka