Equities Market Inconsistent as Large-Cap Stocks Significantly Drop

The equities market for the second week registered a downward performance, a trend attributed to the falling of large-cap stocks.

The performance for NASI, NSE 20 and NSE 25 declined by 1.9, 2.2 and 2.8 percent, respectively, taking their year-to-date (YTD) gains to 9.8, 5.1 and 9.6 percent, respectively.

The decline in NASI was driven by declines in large-cap stocks such as East Africa Breweries Limited (EABL), Co-operative Bank, British American Tobacco (BAT) and Equity Group, which declined by 9.8, 6.1, 4.7 and 2.7 percent, respectively.

Similarly, the equities turnover decreased by 22.1 percent during the week to 23.1 million US dollars from 29.7 million dollars the previous week, taking the YTD turnover to 0.3 billion shillings.

READ ALSO Market Performance Slumps as Equities Turnover Drops 50.3 pc

Foreign investors remained net buyers for the week, with a net purchase position of 5.4 million, a 391.1 percent increase from last week’s net purchase position of 1.1 million dollars.

The market is currently trading at a price to earnings ratio (P/E) of 12.4x, 7.4 percent below the historical average of 13.4x, and a dividend yield of 4.7 percent, above the historical average of 3.8 percent.

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

The current P/E valuation of 12.4x is 26.4 percent above the most recent trough valuation of 9.8x experienced in the first week of February 2017, and 49.1 percent above the previous trough valuation of 8.3x experienced in December 2011.