Last week, the equities market exhibited mixed trends with NASI and NSE 25 gaining 0.2 percent and 0.1 percent respectively.
During the same week, the NSE 20 lost 0.7 percent taking the YTD performance to 5.3 percent for both NASI and NSE 25, while NSE 20 is flat.
For the last twelve months (LTM), NASI, NSE 25 and NSE 20 have gained 44.2, 38.4 and 27.7 percent respectively.
Last week’s performance was attributed to gains by select large-cap stocks such as Co-op Bank and KCB Group, which gained 1.0 and 0.6 percent respectively.
Equities turnover decreased significantly by 40.9 percent to USD 26.8 million from USD 65.5 million the previous week.
“We expect the market to remain supported by positive investor sentiment this year, as investors take advantage of the attractive stock valuations in select counters,” said analysts from Cytonn Investments.
The market is currently trading at a price to earnings ratio (P/E) of 14.2x, which is 5.9 percent above the historical average of 13.4x, and a dividend yield of 3.7%, similar to the historical average of 3.7 percent.
The current P/E valuation of 14.2x is 46.5% above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 71.0 percent above the previous trough valuation of 8.3x experienced in December 2011.
“In our view, there still exist pockets of value in the market, with the current P/E valuation being 16.0% below the most recent peak of 16.9x in February 2015. The charts below indicate the historical P/E and dividend yields of the market,” said Cytonn.