Attractive Stock Valuations to Drive Up Kenya’s Equity Market

The Kenyan stock market closed in the green territory last week attributed to gains of 4.7 percent and 1.9 percent by Safaricom and Co-operative Bank, respectively.

The NSE All-Share Index (NASI) and NSE 25 gained 1.7 percent and 1.5 percent, respectively, while NSE 20 remained unchanged, taking their Year to Date (YTD) performance to 1.7 percent, 1.5 percent and 0.0 percent for NASI, NSE 25 and NSE 20, respectively.

In 2017, NASI, NSE 25 and NSE 20 gained 31.7 percent, 26.9 percent and 16.3 percent, respectively.

“Since the February 2015 peak, the market has lost 1.9 percent and 32.5 percent for NASI and NSE 20, respectively,” According to Cytonn Investments weekly brief note.

Equities turnover increased significantly by 107.4 percent to USD 17.6 mn from USD 8.5 mn the previous week.

Foreign investors remained net sellers with a net outflow of USD 1.7 mn compared to a net outflow of USD 0.2 mn recorded the previous week.

“We expect the market to remain supported by improved investor sentiment this year, as investors take advantage of the attractive stock valuations,” Notes Cytonn.

The market is currently trading at a price to earnings ratio (P/E) of 13.6x, slightly above the historical average of 13.4x, and a dividend yield of 3.8 percent, compared to a historical average of 3.7 percent.

Kenya’s private-sector activity expanded at 53.0 in December,  the best rate in eight months underpinned by increased activity at both manufacturers and services providers.