Kenya’s stock market witnessed an upward trend in the month of July driven by gains in large caps from the banking and telecom sector.
Nairobi All Share Index (NASI) – a weighted index consisting of all the securities on the Nairobi Securities Exchange, NSE 20 and NSE 25 gained 5.5 percent, 5.3 percent and 4.9 percent, respectively.
As at the end of July, the YTD performance was 21.0 percent, 19.2 percent and 21.0 percent for NASI, NSE 20 and NSE 25, respectively.
The equities market performance during the month was led by Diamond Trust Bank, KCB Group, Equity Group and Safaricom, which gained 15.0 percent, 7.9 percent, 7.9 percent and 7.7 percent, respectively.
Since the February 2015 peak, the market has lost 10.9 percent and 31.3 percent for NASI and NSE 20, respectively. Equities turnover increased by 23.9% during the month to USD 205.0 mn from USD 165.4 mn in June 2017, taking the YTD turnover to USD 996.7 mn.
Foreign investors were net sellers for this month with net outflows of USD 19.7 mn, compared to net inflows of USD 7.7 mn witnessed in June 2017. YTD, foreign investors are net sellers with net outflows of USD 24.7 mn.
“We expect the market to remain bullish despite the slower corporate earnings growth in 2017 and the forthcoming general elections, as investors take advantage of the attractive valuations in the market, which is a temporary situation as we expect valuations to pick up after elections, if the elections are peaceful,” according to Cytonn Investments investor brief. The market is currently trading at a price to earnings (PE) ratio of 12.0x, versus a historical average of 13.4x, with a dividend yield of 5.2 percent versus a historical average of 3.8 percent.
The current 12.0x valuation is 23.6 percent above the most recent trough valuation of 9.7x experienced in the first week of February of 2017, and 44.3% above the previous trough valuation of 8.3x experienced in December of 2011.
The charts below indicate the historical P/E and dividend yields of the market.
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