Equities Market Fall as Turnover Hits USD 118.7 Million in October

In the month of October, the equities market registered a negative trend characterized by NASI, NSE 20 and NSE 25’s declines of 3.6, 2.3 and 2.9 percent, respectively. The market’s YTD performance as at the end of October stood at 15.7, 24.3 and 16.2 percent for NASI, NSE 20 and NSE 25, respectively.

Several factors including declines in the communications, consumer staples, and financial services segments; with weighted drops of 5.2, 4.1 percent and 3.6 percent, respectively.

Large caps stocks such as Diamond Trust Bank (DTB), NIC Group, East Africa Breweries Ltd (EABL), Co-operative Bank and Safaricom reduced by 10.9, 6.1, 5.9, 5.9 and 5.1, respectively.

The week saw NASI, NSE 20 and NSE 25 register an upward trend by gaining by 1.4, 0.4 and 0.5 percent, respectively. This was as a result of gains made in counters such as Standard Chartered, which gained by 5.6 percent, Barclays Bank by 5.3 percent, and Safaricom Plc by 4.3 percent.

Equities turnover in October rose by 40.8 percent from 118.7 million US Dollars in September to 167.1 million dollars in October, taking the YTD turnover to 1.6 billion dollars.

For the past week, the turnover dropped by 53.0 percent to 37.8 million dollars from 80.5 million dollars in the previous week with foreign investors remaining net sellers.

Consecutively, foreign investors remained net sellers for the month of October, with a net selling position of 43.2 million dollars, which was a 41.9 percent increase from 30.4 million dollars net outflows recorded last month.

Cytonn Investments project that the market is likely to remain subdued in the near-term as international investors exit the broader emerging markets due to the expectation of rising US interest rates coupled with the strengthening of the US Dollar.

At the moment, the market is trading at a price to earnings ratio (P/E) of 11.4x, 14.9 percent below the historical average of 13.4x, and a dividend yield of 4.9 percent, slightly above the historical average of 3.8 percent.

The current P/E valuation of 11.4x is 16.7 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 37.7 percent above the previous trough valuation of 8.3x experienced in December 2011.