How Corona turned NSE investors into spectators

By John Otini
Friday, September 11th, 2020
NSE 20-Share Index. Photo/PD/FILE
In summary
    • Companies such as Zoom, Netflix, Microsoft Teams, Youtube, Tencent, Amazon, Etherium have propelled their investors into new levels of wealth never seen before with Zoom being up 674 per cent year todate.
    • The uncertainties around Covid-19 vaccine such as approvals, cost, logistics and the dominance of analogue stocks have left investors thinking that short-term under-performance could sustain.

Lack of tech and health firms on the Nairobi Securities Exchange (NSE) has left Kenyan investors as mere spectators as markets around the world piggyback on technology counters to ride out pandemic fears.

The benchmark NSE 20 Share Index has dropped to a 17-year low ending last month at 1,794.6 points, a level last seen on April 28, 2003.

Kenya’s stock market is packed with so-called old-economy stocks such as those in the finance, manufacturing and real estate that have suffered due to lockdowns. 

The NSE lacks companies involved in e-commerce, payments, video streaming, online learning and gaming among others which are emerging as the real winners during this pandemic.

“What we are seeing is a war between the past and the future, the past is a world of analogue and the future is the world of digitisation,” said Arthur Goldstuck, technology analyst at World Wide Worx.

This has seen the NSE endure seven months of selling by foreign investors even as tech heavy bourses in the West, China, Taiwan and others run wild.

Technology stocks have been at the forefront of the worldwide equity rally from March lows as the virus outbreak accelerated the global shift toward automation, and locked-down consumers fuelled demand for everything from video games to e-commerce. 

Since January, stocks such as, Nation Media Group, Bamburi Cement and NSE (the bourse operator) have seen their stocks drop the most by 73.1, 67.1 and 44.9 per cent to trade at Sh10.1, Sh28 and Sh6.7 respectively.

Safaricom, the largest company on the bourse, has also shed 14.7 per cent over the same period to close at Sh26.4 before regaining to its current Sh29.

Excluding Safaricom leaves NSE with no technology stock at all, the bourse is dominated by manufacturing, commercials and finance stocks.

Few beneficiaries

“The NSE will remain overlooked with exception of a few beneficiaries like M-Pesa or Safaricom as the nation does not have significant technology counters,” said Rodney Omukhulu, an analyst at Cytonn Investments.

Energy stocks such as Kenya Power and KenGen have suffered loses due to closure of factories thanks to lack of digitised operations that heavily depend on manual and repetitive labour.

Data from Capital Markets Authority (CMA) shows that the foreign investors were net sellers in the six months to June, selling Sh21 billion worth of their portfolios. This was in contrast to the market performance in a similar half last year when overseas dealers were net buyers at Sh1.96 billion

Hospitality sectors have completely shut down with stocks such as TPS Serena performing poorly and adopting a wait-and-see posture.

The best performing firms such as delivery startups like Jumia, Glovo, Sendy among others are listed abroad or not listed at all.

Most tech firms prefer to list abroad as seen recently by Jumia and Kenya-based music streaming platform Mdundo which listed in Denmark.

Most African bourses are being overlooked by some investors except for the bargain hunters. The African bourses are dominated by old school firms.

Stock markets

African stock markets are down by as much as 24 per cent with NSE being down 3 per cent year to date having hit record lows in November last year due to a difficult economic climate.

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