NSE top index sinks to lowest point this year
The Nairobi Securities Exchange (NSE) all share index has dropped to its lowest point this year after the end of the announcement of the corporate results with Safaricom being the main driver.
This has culminated into very little trading activities at the bourse which is now characterised by low orders ahead of dividend payouts. According to analysts, the approaching election and expected dip in development spending are being considered as critical factors.
“We had expected that with dividends coming soon, there will be a lot of buying activities, but that is not happening. We don’t know what is going on, perhaps this is a reflection of the economy,” said Micheal Mwakio of Suntra Investment Bank.
The NSE has been tracking the selling of Safaricom stock which has dropped to a low of 8 per cent this year while NSE all share index is down 7 per cent.
Valuable company
“Safaricom is almost always the course,” said Mwango Capital as forreigninvestors sustained selling pressure on the most valuable company in the economy. Safaricom is facing a slew of challenges including a delayed mobile money licence in Ethiopia which has seen most analysts put on a neutral rating.
“They have a lot of things going against them at the moment, especially the delays in M-Pesa licence in Ethiopia, meaning they will take even longer to set up the infrastructure,” said Anne Wacera of Cytonn Investments..
Central Bank of Kenya (CBK) data shows that trading activities on the NSE have dropped by 30 per cent last week alone.
“Equity turnover declined by 30.4 per cent, for the week ending April 7,” said the regulator in its weekly bulletin. Analysts say that part of the reason is because foreign investors are exiting the market due to the coming elections and the elevated geopolitical risk in Eastern Europe.
“Foreign investors are exiting because of the political risks and the general political factors around the world,” said an analyst who is not allowed to speak to the media
This also comes at a time when the prices of goods and services have shot up with food prices hitting record highs. A sustained drop in development expenditure also means that the government which is the biggest spender and buyer in the economy has less impact to stimulate growth. Data from African-markets.com shows that the NSE is 7 per cent down year to date and down 7.5 per cent in the last three months. The recurrent expenditure this financial year is 76 per cent of the total budget up from 68 per cent last year and 64 per cent in 2019. Five years ago Kenyans were paying 55 per cent of the budget to sustain the government.
Big four projects
In the development kitty, the Treasury has allocated Sh146 billion for the completion of the Big Four projects initiated by President Uhuru Kenyatta, most of which are fast from being achieved. With tax revenues of Sh1.6 trillion in the last financial year, this means the country is spending on recurrent expenditure more than it is collecting in tax revenues.
The cost of government hit a record high this financial year having risen steadily for the last five years with experts warning that the tax burden could keep many Kenyans in poverty.
