NSE investors lose Sh51b in paper wealth since January

By Zachary Ochuodho
Wednesday, February 12th, 2020
Stock Exchange. Photo/File
In summary

Zachary Ochuodho @Zachuodho

Nairobi Securities Exchange-listed firms caused investors a combined paper loss of Sh51.49 billion between January and February 10, in what market analysts attribute to a harsh business environment.

Statistics indicate that in January—market capitalisation was Sh2.611.46 trillion compared to Sh2.56 trillion on February 10, indicating slow economic performance.

The market cap — or market capitalisation refers to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares.

Analysts say the decline in paper wealth during  the period under review was due to harsh economic environment, which has also been reflected in the performance of various counters of the listed companies.

Statistics from NSE indicate that all the counters except three have since January registered decline in their share prices, including Safaricom Ltd. 

KQ grew from Sh2.05 per share when the year began to Sh2.32 on February 10, East Africa Breweries Ltd (EABL) grew from Sh205 per share to Sh220.5 and Standard Group grew from Sh25.2 per share to Sh26 in February.

Housing Finance is the only company which has maintained its share price at Sh5.76. Safaricom’ share price declined from Sh32.75 per share in January to Sh32.65 per share on February 10.

Figures from NSE shows that the decline of the three NSE All-Share Index (NASI), NSE-20 and NSE-25 – though not uniform, NSE-25, designed to represent the performance of companies listed on Nairobi bourse appeared to have lost 2.4 per cent more, followed by NSE 20 – which lost 3.65 per cent and NASI which lost 1.9 per cent.

Johnson Nderi, Corporate Finance and Advisory manager at ABC Capital Ltd said the share prices for various counters for the period under review generally declined mainly due to the decline in the economy.

“During the year, Kenya’s operating environment was characterised by challenging macro-economic conditions owing to delayed long rains that led to a decline in agricultural production and consequently slowed manufacturing activity,” he said.

Registered growth

Nderi said since January, a number of companies have issued profit warning which indicates that things have not gone on well. However, the harsh environment did not start in January, but was entirely an experience of 2019.

Cytonn Investment said 10 companies have since December 2019 issued profit warnings to investors.

Sudi Ascar, an Investment analyst at Cytonn said, the market capitalisation stood at Sh2.534 trillion when the year began compared to Sh2.48 trillion recorded on January 30.

Churchill Ogutu, Senior Research Analyst at Genghis Capital Ltd, said although the share prices of various counters declined they have started increasing during the week with the NASI, NSE-20 and NSE-25 rising 4 per cent, 0.1 per cent and 2.6 per cent respectively week-on-week. 

“Trading activity was mainly on the large caps Safaricom, KCB Group, EABL and Equity Group.  Foreign investors accounted for 66 per cent of the week’s total activity compared to 54.9 per cent in the previous week,” he said

Ogutu said in January, foreign investors were net buyers during the week posting net inflows of Sh109 million compared to outflows of Sh397.3 million in the previous week.

“Net buying activity was largely on Safaricom, Equity Group and EABL while net selling was on KCB Group and BAT Kenya.

We anticipate activity to remain on the index counters with market dominance by foreign investors in the coming week,” he added. 

He said interest caps have been removed and investors are looking forward to a better performing money market as opposed to the equities market.