Equities Performance Negative as Turnover Declines 16.3 Percent

During the past week, NASI, NSE 20 and NSE 25 marked an inconsistent market performance by registering declines of 0.5, 1.6, and 1.7 percent, respectively bringing the YTD performance to declines of 15.8, 25.6, and 16.0 percent.

NASI’s poor performance has been attributed to declines in large-cap stocks such as Diamond Trust Bank Kenya Ltd, Barclays Bank of Kenya, NIC and EABL, which declined by 8.8, 5.2, 4.3, and 3.0 percent, respectively.

Equities turnover declined by 16.3 percent during the week to 16.3 million US Dollars, from 19.5 million dollars the previous week, taking the YTD turnover to 1.7 billion US Dollars.

Foreign investors turned net buyers for the week, with a net buying position of 1.1 million US Dollars, an increase from last week’s net selling position of 0.7 million dollars.

Cytonn Investments project that the market will 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 market is currently trading at a price to earnings ratio (P/E) of 11.1x, 17.2 percent below the historical average of 13.4x, and a dividend yield of 5.0 percent, above the historical average of 3.8 percent.

With the market trading at valuations below the historical average, we believe there is value in the market.

The current P/E valuation of 11.1x is 14.4 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 33.7 percent above the previous trough valuation of 8.3x experienced in December 2011.