Kenyan Stock Exchange’s Turnover Rises by 9.8pc in H1’2017

The equity turnover at the Nairobi Securities Exchange (NSE)  rose 9.8 per cent in H1’2017 compared to a similar period last year attributed to a subdued investor sentiment ahead of the August polls.

Equity turnover during H1’2017 rose by 9.8per cent to USD 795.7 mn from USD 724.6 mn in H1’2016. Foreign investors were net sellers with net outflow of USD 5.0 mn compared to net inflows of USD 6.5 mn recorded in H1’2016.

“The foreign investor outflows during H1’2017 can be attributed to a subdued investor sentiment, with GDP growth declining to 4.7 percent in Q1’2017 from 5.9 percent in Q1’2016 and on the back decelerating private sector credit growth, despite the stable interest rates,” reported Cytonn Investments.

Read: Capping of Interest Rate done more bad than good on the economy 

“We expect that investor sentiment to remain neutral despite the forthcoming general election, a factor that is likely to slow down activities at the Nairobi Securities Exchange,” notes Cytonn.

During H1’2017, the Kenyan equities market was on an upward trend, with NASI, NSE 20 and NSE 25 gaining 14.7 percent, 13.2 percent and 15.4 percent, respectively.

According to KNBS, the Nairobi Stock 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.”

Analysts in the market note that, “The significant gains were mainly in bank stocks because the market realized that they had overreacted to the negative effects of interest rate caps to the sector.”

“Gains in prices of large cap bank stocks such as DTBK, KCB Group, Coop and Equity Group, which gained 35.6 percent, 31.3 percent, 28.4 percent and 25.8 percent, respectively,” Cytonn Investments. “The biggest loser among the top stocks by market capitalization was BAT, which lost 6.8per cent.”

Since the peak in February 2015, NASI and NSE 20 are down 13.9 percent and 34.4percent, respectively.

The market is currently trading at a price to earnings ratio of 11.8x compared to 10.8x at the end of H1’2016 vs a historical average of 13.4x, with a dividend yield of 5.5% compared to 6.5% at the end of H1’2016 vs a historical average of 3.8%.

The current P/E of 11.8x valuation is 21.4% above the most recent trough valuation of 9.7x experienced in the first week of February 2017, indicating substantial recovery since February 2017 and 41.8% above the previous trough valuation of 8.3x experienced in December 2011.