Equities Market Record Inconsistency as Turnover Drops to USD 34.0 Million

The past one week saw the equities market record inconsistent performances with NSE 25 and NSE 20 declining by 0.2 percent and 0.4 percent, respectively, while NASI gained by 0.8 percent, taking their YTD performance to 13.8 percent, 22.8 percent, and 11.9 percent, for NASI, NSE 20 and NSE 25, respectively.

The week’s performance was driven by gains in large-cap stocks such as EABL, Co-operative Bank, KCB Group and Barclays Bank of Kenya that gained by 5.6, 5.3, 9.4, and 4.4 percent respectively.

For the last twelve months (LTM), NASI, NSE 20 and NSE 25 have declined 6.3 percent, 22.6 percent, and 9.8 percent, respectively.

On the other hand, equities turnover also decreased by 16.9 percent to 34.0 million US dollars from 41.0 million dollars the previous week, bringing the YTD turnover to 1.5 billion dollars.

During the week, foreign investors remained net sellers with the net outflow decreasing by 33.2 percent to 8.0 million dollars, from 12.1 million dollars the previous week.

The expectation according to Cytonn Investments, however, is that the market will remain subdued in the near term as foreign investors exit the broader emerging markets due to the rising interest rates in the US coupled with the strengthening of the US Dollar.

Currently, the market is trading at a price to earnings ratio (P/E) of 12.4x, which is 8.1 percent below the historical average of 13.5x, and a dividend yield of 4.8 percent, higher than the historical average of 3.7 percent.

The current P/E valuation of 12.4x is 26.5 percent above the most recent trough valuation of 9.8x experienced in the first week of February 2017, and 49.4 percent above the previous trough valuation of 8.3x experienced in December 2011.