Stock Market in Focus: Weekly Market Review

Trading activity declined this week as total turnover came to KES 2.7billion with 125milion shares traded compared to KES 3.8 billion on a volume of 159 million shares traded previously.

The NSE 20 Share Index dropped by a huge margin to settle at 3216.62 points, a level last seen in February 2012, while the All Share Index decreased considerably also to end the week at 134.97 points, a level last witnessed in February 2014.

The NSE 25 Share Index lost 10.06% to close the week at 3551.80 points from 3949.14 points before. The banking sector filled up the top losers’ slot this week as investors exited these counters only two days after a new law capping interest rates was signed.

There were massive offers for the bank stocks as investors, mostly foreign ones, hit the eject button following the signing of the bill on Wednesday. Foreign investors had heavily invested in bank stocks at the NSE.

Expectations are that more investors will offload their bank shares in the near term. The new law caps interest rate at four hundred basis points above the prevailing Central Bank Rate. At the current CBR rate of 10.5 per cent, the maximum interest rate banks can now charge on loans is 14.5 per cent.

Fixed Income:

The government short-term bills except the three-month paper sustained their climb for the sixth week as investors’ appetite for the treasury bill rates drove the bills further up. The 91-day paper was unchanged at 8.61%, the 182-day paper advanced the most by 1.47% to 11.18% from 11.02% previously while the 364-day paper gained 0.99% to settle at 11.98% from 11.87% before.

The rates have been on an uptrend as per our earlier anticipation mainly due to government need of cash meant to fund its budget deficit. The fairly attractive rates have also attracted investors who have been exiting their positions in the equities market following their poor run since the beginning of the year.

Currencies:

The Kenya shilling was stable for the better part of the week due to support by inflows from offshore investors buying government securities which balanced out with dollar demand from goods importers.

It however weakened on Thursday owing to President Uhuru Kenyatta’s decision to approve a law capping commercial lending rates which hence witnessed the Central bank of Kenya’s pumping of dollars into the market in efforts to support the shilling. The local currency lost albeit slightly against the Sterling but strengthened against the Euro marginally