The equities market during the past week recorded mixed performances with marginal gains by NSE 20 and NSE 25 registering 0.1 and 0.5 percent, respectively. NASI, on the other hand, declined by 0.6 percent. The trend led to a decline in YTD performance of 14.1, 23.7, and 14.9 percent NASI, NSE 20 and NSE 25, respectively.
The decline in the NASI was driven by declines in large-cap stocks such as Equity Group Holdings, Co-operative Bank, Safaricom and East Africa Breweries Limited (EABL), which declined by 1.3, 1.1, 1.0 and 0.6 percent, respectively.
Equities turnover declined by 71.7 percent during the week to 10.7 million US Dollars from 37.8 million dollars the previous week, taking the YTD turnover to 1.6 billion dollars.
Foreign investors remained net sellers for the week, with a net selling position of 0.3 million US Dollars, a 95.4 percent decline from last week’s net selling position of 7.1 million dollars.
“We expect the market 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,” the weekly Cytonn Investment report stated.
The market is currently trading at a price to earnings ratio (P/E) of 11.6x, 13.4 percent below the historical average of 13.4x, and a dividend yield of 4.9 percent, above the historical average of 3.8 percent.
With the market trading at valuations below the historical average, Cytonn says there is value in the market. The current P/E valuation of 11.6x is 19.6 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 39.8 percent above the previous trough valuation of 8.3x experienced in December 2011.