Equities on a Downward Trend Last But Hope Lies Ahead This Week

Last week, the equities market was on a downward trend with NASI, NSE 20 and NSE 25 losing 2.2, 3.7 and 2.8 percent respectively.

This equities performance took the YTD performance of the NASI, NSE 20 and NSE 25 to 2.4 percent, (9.4 percent) and 5.5 percent respectively.

The week’s performance was driven by declines in large cap banking stocks, with KCB Group, Co-operative Bank and Diamond Trust Bank (DTB) declining by 7.0, 6.1, and 5.0 percent respectively owing to investors’ reaction to their recently released Q1’2018 results, and book closure on DTB for a dividend of 2.6 shillings per share translating to a dividend yield of 1.4 percent.

For the last twelve months (LTM), NASI and NSE 25 have gained 20.5 percent and 16.3 percent respectively, while NSE 20 has declined by 1.4 percent.

Equities turnover increased by 1.5 percent this week to USD 33.5 million from USD 33.1 million the previous week.

Foreign investors remained net sellers of large cap stocks such as Safaricom, as an increase in political risks in the Eurozone, and uncertainty over the structure of a trade deal between the US and China dampened appetite for equities

The market is currently trading at a price to earnings ratio (P/E) of 13.8x, which is above the historical average of 13.4x, and a dividend yield of 3.8 percent slightly above the historical average of 3.7 percent.

The current P/E valuation of 13.8x is 40.8 percent above the most recent trough valuation of 9.8x experienced in the first week of February 2017, and 66.3 percent above the previous trough valuation of 8.3x experienced in December 2011.