August polls to slow down Corporate earnings growth

The uncertainty with the outcome of Kenya’s Presidential elections has already stirred the equities market projected to record minimal gains in 2017.

In the first half of 2017, the Nairobi Securities Exchange (NSE) 20-Share index peaked at 3,112 points in the month of March.

“This was a drop compared to 3,982 points in the same quarter in 2016. The value of shares traded dropped to KSh 12.4 billion in March from KSh 13.4 billion in the same month of 2016,” KNBS First Quarter 2017 report.

Subsequently, Cytonn Investments note, “Since the February 2015 peak, the market has lost 34.5 percent and 14.2 percent for NSE 20 and NASI, respectively.”

Cytonn expects corporate earnings growth to be slower in 2017 and neutral investor sentiment mainly due to the forthcoming general elections.

“We therefore expect the Kenyan equities market to record minimal further gains in 2017, due to the above factors, as well as the aggressive rate hike cycle in the US, which may reduce the level of foreign investors’ participation in the local equities market.”

Last week, the equities market was on a downward trend with NSE 20, NASI and NSE 25 losing 0.1 percent, 0.4 percent  and 1.5 percent, respectively.

Read: Yields on Kenyan Treasury bills  dip at Thursday’s auction.

This has taken their YTD performance to 14.2 percent, 13.7 percent and 13.1 percent for NASI, NSE 25 and NSE 20, respectively.

Last week’s performance was attributed to losses in large cap stocks such as Co-operative Bank, BAT and Barclays, which lost 17.7 percent, 5.2 percent and 4.0 percent, respectively.

“Co-operative Bank closed books for their 1 for 5 bonus share issue, hence the 17.7 percent  decline, which was slightly higher than the expected 16.7 percent decline that was attributable to this increase in the bank’s shares (the increase in shares implies that every share in the market would be worth less by a reciprocal of the growth rate),” notes Cytonn Investment investor brief.

Foreign investor participation declined to 37.4 percent from 68.3 percent recorded the previous week.